<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 April 30, 2000
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
BRADY CORPORATION
-----------------
(Exact name of registrant as specified in its charter)
Wisconsin 39-0178960
--------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6555 WEST GOOD HOPE ROAD, MILWAUKEE, WISCONSIN 53223
----------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(414) 358-6600
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
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 May 24, 2000, there were outstanding 20,919,400 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
BRADY CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. Financial Information
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheet 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 10
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
<PAGE> 3
BRADY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
ASSETS April 30, 2000 July 31, 1999
------ -------------- -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 34,164 $ 75,466
Accounts receivable, less allowance for losses ($2,898 and $2,339 respectively) 89,209 73,290
Inventories 41,687 37,527
Prepaid expenses and other current assets 45,973 16,886
--------- ---------
Total current assets 211,033 203,169
Other assets:
Intangibles - net 101,188 72,941
Other 8,502 8,026
Property, plant and equipment:
Cost:
Land 4,936 5,008
Buildings and improvements 43,470 41,417
Machinery and equipment 113,559 101,324
Construction in progress 10,569 2,229
--------- ---------
172,534 149,978
Less accumulated depreciation 95,800 82,994
--------- ---------
Net property, plant and equipment 76,734 66,984
--------- ---------
Total $ 397,457 $ 351,120
========= =========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities:
Accounts payable $ 25,260 $ 19,378
Wages and amounts withheld from employees 23,466 23,186
Taxes, other than income taxes 4,093 2,290
Accrued income taxes 10,323 12,516
Other current liabilities 13,162 13,289
Short-term borrowings and current maturities on long-term debt 18,851 2,626
--------- ---------
Total current liabilities 95,155 73,285
Long-term debt, less current maturities 3,699 1,402
Other liabilities 17,066 15,869
--------- ---------
Total liabilities 115,920 90,556
Stockholders' investment:
Preferred stock 2,855 2,855
Class A nonvoting common stock - issued 20,923,948 and 20,839,841 shares, respectively 209 208
Class B voting common stock - issued and outstanding 1,769,314 shares 18 18
Additional paid-in capital 30,012 28,383
Earnings retained in the business 256,024 233,521
Treasury stock - 4,548 shares of Class A nonvoting common stock, at cost (132) (132)
Cumulative other comprehensive income (5,638) (1,958)
Other (1,811) (2,331)
--------- ---------
Total stockholders' investment 281,537 260,564
--------- ---------
Total $ 397,457 $ 351,120
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 4
BRADY CORPORATION 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 Nine Months Ended
April 30 April 30
2000 1999 2000 1999
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 142,484 $121,455 $397,255 $350,566
Operating expenses:
Cost of products sold 59,740 50,501 167,388 151,780
Research and development 6,119 4,044 15,942 13,052
Selling, general and administrative 57,523 46,182 159,666 137,367
--------- -------- -------- --------
Total operating expenses 123,382 100,727 342,996 302,199
Operating income 19,102 20,728 54,259 48,367
Other income and (expense):
Investment and other income - net (119) 360 939 546
Interest expense (135) (104) (254) (352)
--------- -------- -------- --------
Income before income taxes 18,848 20,984 54,944 48,561
Income taxes 7,119 8,047 21,016 18,939
--------- -------- -------- --------
Net income 11,729 12,937 33,928 29,622
Earnings retained in business at beginning of period 248,126 217,817 233,521 208,254
Less dividends:
Preferred Stock (65) (65) (194) (194)
Common Stock (3,766) (3,529) (11,231) (10,522)
--------- -------- -------- --------
Earnings retained in business at end of period $ 256,024 $227,160 $256,024 $227,160
========= ======== ======== ========
Net income per Class A Nonvoting Common Share
Basic $ 0.51 $ 0.57 $ 1.49 $ 1.31
========= ======== ======== ========
Diluted $ 0.51 $ 0.57 $ 1.47 $ 1.30
========= ======== ======== ========
Net income per Class B Voting Common Share
Basic $ 0.51 $ 0.57 $ 1.46 $ 1.28
========= ======== ======== ========
Diluted $ 0.51 $ 0.57 $ 1.44 $ 1.27
========= ======== ======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 5
BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
(Unaudited)
Nine Months Ended
April 30
2000 1999
-------- --------
<S> <C> <C>
Operating activities:
Net income $ 33,928 $ 29,622
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 9,059 8,418
Amortization 3,949 2,902
Loss on sale of property, plant and equipment 45 23
Provision for losses on accounts receivable 1,295 916
Other 521 521
Changes in operating assets and liabilities (net of effects of business
acquisitions):
Accounts receivable (15,155) (6,869)
Inventory (1,494) 2,316
Prepaid expenses and other assets (29,339) 1,671
Accounts payable, accrued expenses and other liabilities 3,619 2,378
Income taxes (2,099) 3,152
-------- --------
Net cash provided by operating activities 4,329 45,050
Investing activities:
Acquisitions of businesses, net of cash acquired (38,371) (9,672)
Purchases of property, plant and equipment (14,757) (8,508)
Proceeds from sale of property, plant and equipment 198 189
Other 16 (161)
-------- --------
Net cash (used in) investing activities (52,914) (18,152)
Financing activities:
Payment of dividends (11,425) (10,716)
Proceeds from issuance of Common Stock 1,630 814
Principal payments on debt (9,431) (676)
Proceeds from short-term borrowings 25,161 288
-------- --------
Net cash provided by (used in) financing activities 5,935 (10,290)
Effect of exchange rate changes on cash 1,348 1,646
-------- --------
Net (decrease) increase in cash and cash equivalents (41,302) 18,254
Cash and cash equivalents, beginning of period 75,466 65,609
-------- --------
Cash and cash equivalents, end of period $ 34,164 $ 83,863
======== ========
Supplemental disclosures:
Cash paid during the period for:
Interest $ 364 $ 246
Income taxes, net of refunds 21,946 12,958
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE> 6
BRADY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended April 30, 2000
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 April 30, 2000, and July 3l, 1999, and its results of operations
for the three months and nine months ended April 30, 2000, and 1999 and its cash
flows for the nine months ended April 30, 2000, and 1999. The consolidated
balance sheet at July 31, l999, 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 accounting principles generally accepted
in the United States of America 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
Reconciliations of the numerator and denominator of the basic and diluted
per share computations for the Company's Class A and Class B common stock are
summarized as follows:
<TABLE>
<CAPTION>
Fiscal 2000 Fiscal 1999
----------- -----------
3rd Quarter 9-Month 3rd Quarter 9-Month
----------- ------- ----------- -------
<S> <C> <C> <C> <C>
Numerator:
Net income $11,729,000 $33,928,000 $12,937,000 $29,622,000
Less: Preferred stock dividends (64,784) (194,351) (64,784) (194,351)
----------- ----------- ----------- -----------
Numerator for basic and diluted
Class A earnings per share 11,664,216 33,733,649 12,872,216 29,427,649
Less: Preferential dividends -- (694,492) -- (690,541)
Less: Preferential dividends on
dilutive stock options -- (10,410) -- (2,739)
-- -------- -- -------
Numerator for basic and diluted
Class B earnings per share $11,664,216 $33,028,747 $12,872,216 $29,734,369
=========== =========== =========== ===========
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
Fiscal 2000 Fiscal 1999
----------- -----------
3rd Quarter 9-Month 3rd Quarter 9-Month
----------- ------- ----------- -------
<S> <C> <C> <C> <C>
Denominator:
Denominator for basic earnings per
share for both Class A and Class B 22,690,631 22,665,331 22,546,554 22,524,995
Plus: Effect of dilutive stock options 236,481 271,350 146,927 117,105
------- ------- ------- -------
Denominator for diluted earnings per
share for both Class A and Class B 22,927,112 22,936,681 22,693,481 22,642,100
========== ========== ========== ==========
Class A common stock earnings per share:
Basic $0.51 $1.49 $0.57 $1.31
Diluted $0.51 $1.47 $0.57 $1.30
Class B common stock earnings per share:
Basic $0.51 $1.46 $0.57 $1.28
Diluted $0.51 $1.44 $0.57 $1.27
</TABLE>
Options to purchase 526,000 and 466,918 shares of Class A common stock were
not included in the computations of diluted earnings per share for the quarters
ending April 30, 2000, and 1999, respectively, because the option exercise
prices were greater than the average market price of the common shares and,
therefore, the effect would be antidilutive.
Options to purchase 260,167 and 1,005,418 shares of Class A common stock
were not included in the computations of diluted earnings per share for the nine
months ending April 30, 2000, and 1999, respectively, because the option
exercise prices were greater than the average market price of the common shares
and, therefore, the effect would be antidilutive.
NOTE C - Comprehensive Income
Total comprehensive income, which was comprised of net income, foreign
currency adjustments and an unrealized gain on investment, amounted to
approximately $9,408,000 and $10,872,000 for the three months ended April 30,
2000, and 1999, respectively, and $30,248,000 and $28,834,000 for the nine
months ended April 30, 2000, and 1999, respectively.
NOTE D - Acquisition
Effective September 3, 1999, the Company acquired the brand name, customer
list and catalog artwork of Champion America, Inc., located in Chagrin Falls,
Ohio, a direct marketer of signs, labels and identification products for cash of
approximately $5,600,000. The purchase price of this acquisition is subject to
change based on post-closing adjustments.
Effective March 3, 2000, the Company acquired Data Recognition, Inc.,
located in Austin, Texas, a systems integrator providing automatic
identification and data collection (AIDC) solutions.
Effective March 22, 2000, the Company acquired Imtec, Inc., located in
Bellows Falls, Vermont, a manufacturer of high-performance bar-code labels and
labeling systems used in automatic identification applications.
7
<PAGE> 8
The Company acquired Data Recognition, Inc. and Imtec, Inc. for cash of
approximately $34,900,000. The purchase price of the Data Recognition
acquisition is subject to change based on post-closing adjustments.
These acquisitions have been accounted for using the purchase method of
accounting and accordingly the results of operations have been included since
the date of acquisition in the accompanying financial statements. The pro-forma
results assuming the acquisition had been consummated as of the beginning of the
periods presented are not significant.
NOTE E - Segment Information
The Company's reportable segments are business units that are each managed
separately because they manufacture and/or distribute distinct products using
different processes. The Company has three reportable segments: the
Identification Solutions & Specialty Tapes Group, the Graphics Group and the
Direct Marketing Group. Following is a summary of segment information for the
three months ended April 30, 2000, and 1999:
<TABLE>
<CAPTION>
(Dollars in Thousands) Identification
Solutions & Corporate
Specialty Direct and
Tapes Graphics Marketing Eliminations Totals
----- -------- --------- ------------ ------
<S> <C> <C> <C> <C> <C>
Three months ended April 30, 2000:
Revenues from external customers $65,220 $33,732 $43,532 $142,484
Intersegment revenues 834 1,474 252 ($2,560) --
Profit (loss) 12,859 6,045 7,680 (5,656) 20,928
Three months ended April 30, 1999:
Revenues from external customers $49,150 $31,140 $41,165 $121,455
Intersegment revenues 935 417 238 ($1,590) --
Profit (loss) 9,205 5,812 8,665 (1,882) 21,800
</TABLE>
Following is a summary of segment information for the nine months ended
April 30, 2000, and 1999:
<TABLE>
<CAPTION>
(Dollars in Thousands) Identification
Solutions & Corporate
Specialty Direct and
Tapes Graphics Marketing Eliminations Totals
----- -------- --------- ------------ ------
<S> <C> <C> <C> <C> <C>
Nine months ended April 30, 2000:
Revenues from external customers $177,901 $95,414 $123,940 $397,255
Intersegment revenues 2,234 3,041 746 ($6,021) --
Profit (loss) 34,701 14,824 21,002 (11,720) 58,807
Nine months ended April 30, 1999:
Revenues from external customers $138,418 $93,513 $118,635 $350,566
Intersegment revenues 2,362 1,459 685 ($4,506) --
Profit (loss) 21,966 12,720 21,425 (4,522) 51,589
</TABLE>
8
<PAGE> 9
Following is a reconciliation of profit for the three and nine months ended
April 30, 2000, and 1999:
<TABLE>
<CAPTION>
(Dollars in Thousands) Fiscal 2000 Fiscal 1999
----------- -----------
3rd Quarter 9-Month 3rd Quarter 9-Month
----------- ------- ----------- -------
<S> <C> <C> <C> <C>
Total profit from reportable segments $26,584 $70,527 $23,682 $56,111
Corporate and eliminations (5,656) (11,720) (1,882) (4,522)
Unallocated amounts:
Goodwill (1,524) (3,773) (912) (2,580)
Interest-net 287 1,389 309 1,026
Foreign exchange (624) (824) (104) (874)
Other (219) (655) (109) (600)
----- ----- ----- -----
Income before income taxes $18,848 $54,944 $20,984 $48,561
======= ======= ======= =======
</TABLE>
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
For the three months ended April 30, 2000, revenues of $142,484,000 were
17.3% higher than the same quarter of the previous year. For the nine months
ended April 30, 2000, revenues of $397,255,000 were 13.3% higher than the same
period last year. Sales of the Company's international operations increased
18.9% for the quarter and 12.9% for the nine months ended April 30, 2000. Of
that increase, continued market penetration of existing base products in Brady's
operations outside the United States increased international sales by 15.4% for
the quarter and 9.8% for the nine month period. The acquisitions of VisiSign
Pty. Ltd., Holman Groupe S.A. and Soft S.A. increased international sales by
8.8% for the quarter and 8.6% for the nine month period. These increases were
somewhat 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 5.3 percentage points in the quarter and 5.4
percentage points in the nine month period. Sales of the Company's U.S.
operations increased 16.0% in the quarter and 13.6% for the nine months ended
April 30, 2000. Of that increase, base business increased 5.8% in the quarter
and 6.5% for the nine month period. The acquisitions of Barcodes West, Inc., the
Champion America, Inc. brand name, Data Recognition, Inc. and Imtec, Inc.
increased U.S. sales by 10.3% in the quarter and 7.1% for the nine month period.
The cost of products sold as a percentage of sales increased slightly from
41.6% to 41.9% for the quarter, but decreased from 43.3% to 42.1% for the nine
months ended April 30, 2000. The year to date decrease is due to reduced costs
from changes in product mix towards products with higher margins and reduced
expenses as a result of manufacturing efficiencies from the Company's continuous
improvement efforts. Selling, general and administrative expenses as a
percentage of sales were 40.4% for the quarter compared to 38.0% for the same
quarter of the previous year. For the nine months ended April 30, 2000, this
percentage was 40.2% compared to 39.2% for the same period last year. These
increases were due primarily to the Company's investment in process improvements
discussed in the Financial Condition section below. Research and development
expenditures increased 51.3% for the quarter and 22.1% for the nine months ended
April 30, 2000, over the same periods last year reflecting the Company's
commitment to new product development. As a percentage of sales, research and
development expenses increased from 3.3% to 4.3% for the quarter and from 3.7%
to 4.0% for the nine month period.
Operating income was $19,102,000 for the quarter and $54,259,000 for the
nine months ended April 30, 2000, compared to $20,728,000 and $48,367,000 for
the same periods last year because of the factors cited above.
Investment and other income decreased $479,000 for the quarter and
increased $393,000 for the nine months ended April 30, 2000, from the same
periods last year. The decrease in the quarter was the result of higher foreign
exchange transaction losses and lower investment income due to lower cash
balances resulting from acquisitions made during the quarter. The year to date
increase is the result of slightly lower foreign exchange transaction losses and
higher investment income because of higher interest rates.
Income before income taxes decreased 10.2% for the quarter and increased
13.1% for the nine months ended April 30, 2000, compared to the prior year
results. The Company's effective tax rate was 37.8% for the quarter compared to
38.3% for the same quarter of the previous year. For the nine months ended April
30, 2000, this percentage was 38.2% compared to 39.0% for the same period last
year. These decreases were the result of profitability changes in the Company's
international operations.
10
<PAGE> 11
Net income for the three months ended April 30, 2000, decreased 9.3% to
$11,729,000 compared to $12,937,000 for the same quarter of the previous year.
For the nine months ended April 30, 2000, net income increased 14.5% to
$33,928,000 from $29,622,000 for the same period last year. On a per share
basis, diluted net income for the three months ended April 30, 2000, was $0.51
compared to $0.57 for the same quarter of the previous year. For the nine months
ended April 30, 2000, diluted net income per share was $1.47 compared to $1.30
for the same period last year. The increase for the nine month period was due
primarily to higher sales, while the decrease in the current quarter resulted
primarily from increased spending during the quarter for process improvements
and research and development and unusually strong margins in the prior year's
third quarter.
Business Segment Operating Results
Identification Solutions & Specialty Tapes (ISST) Group:
ISST sales increased 32.7% for the three months ended April 30, 2000. For
the nine months ended April 30, 2000, ISST sales were 28.5% higher than the same
period last year. The increases were primarily the result of a growth of base
business, an increase of 20.4% and 20.6% for the quarter and nine month period,
respectively. The acquisitions of Barcodes West, Inc. Holman Groupe, S.A., Data
Recognition, Inc. and Imtec, Inc. also contributed, increasing sales over prior
year 14.1% for the quarter and 10.4% for the nine month period. 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 within the group by 1.8% in the quarter and 2.5% in
the nine month period. Sales were up significantly in Latin America and Asia.
Profit as a percentage of sales increased from 18.7% to 19.7% for the quarter
and from 15.9% to 19.5% for the nine months ended April 30, 2000. The increases
were primarily the result of product mix, operating leverage from the increased
volume and manufacturing efficiencies.
Graphics Group:
Graphics sales increased 8.3% for the three months ended April 30, 2000.
For the nine months ended April 30, 2000, Graphics sales were 2.0% higher than
the same period last year. Sales generated by the acquisitions of VisiSign Pty.
Ltd. and Soft S.A. offset weakness in the industrial and safety markets in the
United States and Europe and the decrease in sales of Colorpix wide-format color
inkjet printers and related materials. Sales were up in Asia, Australia and
Canada and down in Europe and the United States. Profit as a percentage of sales
decreased from 18.7% to 17.9% for the quarter and increased from 13.6% to 15.5%
for the nine months ended April 30, 2000. The decrease in the quarter was a
result of the effect of the strong yen on the Graphics group purchases and
increases in new product development expenditures. The year to date increase was
primarily the result of the group's refocusing resources on products with higher
profit margins, which has more than offset the increased investment in new
product development and the negative effect of the strong yen as mentioned
above.
Direct Marketing Group:
Direct Marketing sales increased 5.8% for the three months ended April 30,
2000. For the nine months ended April 30, 2000, Direct Marketing sales were 4.5%
higher than the same period last year. The Direct Marketing Group was
particularly impacted by the negative effect of fluctuations in the exchange
rates used to translate financial results into U.S. currency, which reduced
international sales growth within the group by 4.2% in the quarter and 4.0% in
the nine month period. For the quarter, sales in each international unit were up
significantly in local currency. On a dollar basis, the international business
was flat for the nine month period. In local currencies, these businesses are up
nearly 8%. Profit as a percentage of sales decreased from 21.0% to 17.6% for the
quarter and from 18.1% to 16.9% for the nine months ended April 30, 2000. These
decreases were primarily due to the impact of currency fluctuations.
11
<PAGE> 12
Financial Condition
The Company's liquidity remains strong. The current ratio as of April 30,
2000, was 2.2 to 1. Cash and cash equivalents were $34,164,000 at April 30,
2000, compared to $75,466,000 at July 31, 1999. The decrease was primarily due
to the purchase of certain assets of Champion America, Inc., the paydown of
Korean bank debt and the acquisitions of Data Recognition, Inc. and Imtec, Inc.
Working capital decreased $14,006,000 during the nine months and equaled
$115,878,000 as of April 30, 2000.
Cash flow from operations totaled $4,329,000 for the nine months ended
April 30, 2000, compared to $45,050,000 for the same period last year. The
decrease was primarily the result of cash paid to purchase shares of Critchley
Group plc, and an increase in accounts receivable and prepaid expenses. These
changes more than offset the Company's increased profitability. Capital
expenditures were $14,757,000 in the nine months ended April 30, 2000, compared
to $8,508,00 in the first nine months last year. The increase over prior year
was primarily a result of investments in new technology to support our process
improvement initiative. Cash provided by financing activities was $5,935,000 for
the nine month period ended April 30, 2000, resulting from proceeds from
short-term borrowings, offset by the payment of dividends to the Company's
stockholders and payments of Korean bank debt. Financing activities for the same
period last year consumed $10,290,000. The current year change is primarily a
result of the short-term borrowings.
Long-term debt as a percentage of long-term debt plus stockholder's
investment was 1.3% at April 30, 2000, compared to 0.5% at July 31, 1999.
In September 1999, the Company entered into a $150,000,000 revolving loan
agreement with six banks. In January 2000, the agreement was amended to increase
the available amount to $200,000,000. On January 27, 2000, the Company commenced
an unsolicited cash tender offer for Critchley Group plc, a British company, at
575 pence per Critchley share. Purchase of all of Critchley's shares at this
price would have required approximately $155,000,000 of cash plus expenses of
the transaction. On February 15, 2000, the Company announced that it would not
match a competing offer of 750 pence per Critchley share made by a competing
offeror. Subsequent to April 30, 2000, the Company received cash of
approximately $27,000,000 for their 14.9% interest in Critchley, which resulted
in a pretax gain, net of expenses, of approximately $4,000,000.
During the second quarter of fiscal 2000 a Company-wide process improvement
initiative was begun. This initiative will improve and standardize processes
throughout the Company and install new technology to support those processes.
The Company estimates this initiative will take approximately three years to
complete with total cash outlay of approximately $30,000,000. The Company
estimates that about 60% of that cash outlay will be capital expenditures.
The Company believes that its cash and cash equivalents, the cash flow from
operating activities and available line of bank credit are adequate to meet the
Company's current and anticipated investing and financing needs.
12
<PAGE> 13
Forward-Looking Statements
Matters in this Quarterly Report may contain forward-looking information,
as defined in the Private Securities Litigation Reform Act of 1995. All such
forward-looking information in this report involves risks and uncertainties,
including, but not limited to, variations in the economic or political
conditions in the countries with which the Company does business; fluctuations
in currency exchange rates for international currencies versus the U.S. dollar;
technology changes; the continued availability of sources of supply; domestic
and international economic conditions and growth rates; the ability of the
Company to timely adjust its cost structure to changes in levels of sales,
product mix and low levels of order backlog; unknown information with respect to
non-negotiated acquisitions; and the ability of the Company to acquire new
businesses. The Company cautions that forward-looking statements are not
guarantees, since there are inherent difficulties in predicting future results,
and that actual results could differ materially from those expressed or implied
in forward-looking statements.
13
<PAGE> 14
PART II. OTHER INFORMATION
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 April 30, 2000,
other than a report previously noted in the prior quarter's
Form 10-Q.
14
<PAGE> 15
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
BRADY CORPORATION
Date: June 1, 2000 /s/ K. M. Hudson
------------ ----------------
K. M. Hudson
President
Date: June 1, 2000 /s/ F. M. Jaehnert
------------ ------------------
F. M. Jaehnert
Vice President & Chief Financial Officer
(Principal Accounting Officer)
15
