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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, 1994
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
W.H. BRADY CO
(Exact name of registrant as specified in charter)
Wisconsin 39-0178960
(State of Incorporation) (IRS Employer Identification No.)
727 West Glendale Avenue
P.O. Box 571
Milwaukee, WI 53201
(Address of Principal Executive Offices and Zip Code)
(414) 332-8100
(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 October 3, 1994, there were outstanding 5,477,312 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. 1994 Annual Report, Incorporated into Part II & IV
I N D E X
PART I PAGE
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 - 8
Backlog I - 8
Raw Materials I - 8
Competition I - 9
Employees I - 9
Environment I - 9
Financial Information About Foreign and
Domestic Operations and Export Sales I - 9
Item 2. Properties I -10
Item 3. Legal Proceedings I -10
Item 4. Submission of Matters to a Vote of
Security Holders I -10
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
I N D E X
PART III (Continued)
Item 11. Executive Compensation III - 4
Summary Compensation Table III - 4
Stock Options III - 5
Common Stock Price Performance Graph III - 8
Compensation of Directors III - 9
Termination of Employment Arrangements III - 9
Compensation Committee Interlocks and
Insider Participation III -10
Profit Sharing and Employee Thrift Plan III -10
Deferred Compensation Arrangements III -11
Compensation Committee Report on
Executive Compensation III -11
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 - 9
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 15
manufacturing facilities in the United States and six foreign countries.
The Company operates through seven subsidiaries with operations in three
states and in Australia, Belgium, Canada, England, France, Germany, Hong
Kong, Italy, Japan, New Zealand, Singapore, Spain and Sweden. The
Company's principal office is located at 727 West Glendale Avenue,
Milwaukee, Wisconsin 53201 and its telephone number is (414) 332-8100.
(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,
faceplates, and control panels; safety and instructional signs;
specialized tapes used in audio, video and computer applications; and
pressure sensitive wound care products. 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 15 manufacturing facilities in the United
States and six foreign countries. Domestic operations are conducted
through its North American Group and Direct Marketing Group with
locations in Connecticut, North Carolina, and Wisconsin. International
operations are conducted through its International Group and Direct
Marketing Group with locations in Australia, Belgium, Canada, England,
France, Germany, Hong Kong, Italy, Japan, New Zealand, Singapore, Spain
and Sweden.
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 25% 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, abrasive and solvent resistant
coatings for polyester and polycarbonates, and wound care devices.
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 $10.3 million, $12.1 million and $10.0 million in
Fiscal 1994, 1993 and 1992, respectively, on its research and
development activities, all of which were Company sponsored. In Fiscal
1994, 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
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 release coated backings mainly for use by other
divisions and subsidiaries. The Company's production of the majority of
its own adhesive stocks and release coatings 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 and faceplates that identify and
decorate 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; and wound care devices. The Company's most
significant products are described below.
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.
The Company manufactures both self-adhesive and non-adhesive wire
marking products 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 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 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 are either preprinted or
blank. The blank wire markers can be computer printed by the customer
using Brady developed software. Preprinted wire markers 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 are mounted on pin-fed rolls or backing sheets. An important
feature of the Brady computer printable wire markers 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
up to 1,800 markers per hour. Wire marking sleeves may also be heat
shrunk onto the wire using equipment designed for that purpose.
Nameplates, Faceplates and Control Panels
Brady's nameplates, faceplates and control panels, all of which are
custom designed for specific product and customer needs, are used for
product identification. These products display company logos or other
designs to enhance a customer's product or company image, and may also
incorporate a variety of functional features such as light emitting
diode displays, backlighting (spectrum match filter windows for light
transmission), deadfront lighting (light activated message windows), hot
spot compensation (a mechanism for the even diffusion of a single light
source over a wider area), and light filters. Brady manufactured
nameplates, faceplates and control panels are used on electrical
appliances and consumer products, medical and diagnostic equipment,
computers, machine control panels, automobile dashboards, tools and
identification plates.
These products may be surface printed on plastic or metal and
protected with a coating or an overlaminate to resist solvents and
abrasions, or the products may be constructed of a plastic film and
printed on the underside to provide maximum protection. Nameplates,
faceplates and control panels are applied to customer products with
pressure-sensitive adhesives, most of which are developed by the Company
to meet specific bonding requirements. Most of these adhesives are
formulated from acrylic-base polymers, which provide a variety of
adhesive properties as well as superior durability. Rubber-based
adhesives are used when nameplates are applied to low friction surfaces
such as polyethylene and polypropylene.
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 are cassette leader and
splicing tapes and conductive splicing tapes. Video products include
Beta/VHS 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
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. 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, temperature indicating labels, and hospital
and clinical labels.
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 1994, no single customer accounted for as
much as 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 by the Company's International Group and operations
conducted by its seventeen international locations (Australia, Belgium,
Canada (2), England (2), France (2), Germany (2), Hong Kong, Italy,
Japan, 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 1994,
1993, and 1992, international sales accounted for 37.1%, 32.0%, and
30.0%, 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.
Backlog
As of July 31, 1994, the amount of the Company's backlog orders
believed to be firm was $17.4 million. This compares with approximately
$15.2 million and $19.4 million of backlog orders as of July 31, 1993
and 1992, 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
nameplates and faceplates, and 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.
Employees
As of July 31, 1994, Brady employed approximately 1,900 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 $1,052,000.
(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 15 manufacturing facilities,
six of which are located in Wisconsin, two in North Carolina, 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 923,000
square feet of space. All of the Company's facilities are owned by it,
except for a total of approximately 150,000 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.
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 37 of the W.H. Brady Co. 1994 Annual Report.
(b) Holders
The number of holders of record of the Company's Class A and Class
B Common Stock as of September 30, 1994 was 304 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:
Year
Ending
Year Ended 7/31/93 Year Ended 7/31/94 7/31/95
1st2nd 3rd 4th 1st 2nd 3rd 4th 1st
QtrQtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr
Class A $.15 $.15 $.15 $.15 $.17 $.17 $.17 $.17 $.20
Class B .05 .15 .15 .15 .07 .17 .17 .17 .10
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. 1994 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 through 22 of the W.H. Brady Co. 1994 Annual Report.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated by reference to
Pages 23 through 35 of the W.H. Brady Co. 1994 Annual Report.
ITEM 9 CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Name Age Title
Katherine M. Hudson 47 President, CEO and
Director
Donald P. DeLuca 54 Senior Vice President, Treasurer
and Assistant Secretary
Richard L. Fisk 50 Vice President, Direct Marketing
Gregory W. Gyllstrom 42 Vice President, Domestic
Peter J. Lettenberger 57 Secretary and Director
Daniel J. Subach 47 Vice President, Research and
Development
James M. Sweet 41 Vice President, Human Resources
Thomas L. Turner 54 Vice President, Administration
William H. Brady III 52 Director
Elizabeth B. Lurie 49 Director
Robert C. Buchanan 54 Director
Roger D. Peirce 57 Director
Michael S. Joyce 52 Director
Richard A. Bemis 53 Director
Frank W. Harris 52 Director
Gary E. Nei 50 Director
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 of 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.
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.
GREGORY W. GYLLSTROM - Mr. Gyllstrom joined the Company in June 1980 and
was appointed to his present position in February 1992. He previously
served as General Manager of the Company's Signmark Division for five
years. Mr. Gyllstrom left the Company in October 1994.
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.
DANIEL J. SUBACH - Mr. Subach joined the Company in February 1992 as
Vice President-Research and Development. Prior thereto he was Director
of New Product Ventures for H.B. Fuller. Mr. Subach resigned from the
Company in July 1994.
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.
THOMAS L. TURNER - Mr. Turner joined the Company in September 1979. In
October 1985 he was appointed Director, Information Services. In
September 1987 he was appointed Vice President, Administration. Mr.
Turner will retire in December 1994.
WILLIAM H. BRADY III - Mr. Brady has been a director of the Company
since January of 1979. He is an audio consultant for Brady Audio Consulting.
ELIZABETH B. LURIE - Mrs. Lurie has been a director of the Company since
January of 1979. 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. She now lives in North
Carolina where she is the principal owner of an art gallery in Maggie
Valley.
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.
ROGER D. PEIRCE - Mr. Peirce has served as a director and a member of
the compensation committee of the Company since September, 1988. From
September 1986 to December 1993, he was President of Super Steel
Products Corp., a manufacturer and marketer of fabricated metal products
in Milwaukee, Wisconsin. Prior thereto he was a managing partner,
partner or staff accountant for Arthur Andersen & Co. (since 1961),
independent certified public accountants.
MICHAEL S. JOYCE - Mr. Joyce has been a director of the Company since
March of 1989 and a member of its audit committee since June of 1990.
Mr. Joyce is President and CEO of the Lynde and Harry Bradley
Foundation. Prior thereto he was Executive Director and a trustee of
the John M. Olin Foundation for seven years. Mr. Joyce is also a
trustee of the Pinkerton Foundation, the Lehrman Institute, the
Institute for Educational Affairs and a member of the Advisory Panel of
the Conference Board of Associated Research Councils.
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. Dr. Harris
is also a director of Ballard Advance Materials.
GARY E. NEI - Mr. Nei has been a Director of the Company since November
1992. Mr. Nei is President and CEO of Eon Laboratories, Inc., a
manufacturer and distributor of pharmaceuticals in Lake Forest,
Illinois. He is also a director of DIFCO 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.
ITEM 11 EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or accrued by
the Company during the three fiscal years ended July 31, 1994 to those
persons who, as of the end of Fiscal 1994, were the Named Executive
Officers.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
Name and Other Annual Awards All
Other
Principal Fiscal Salary Bonus Compensation Options/SAR Compen-
sation
Position Year ($) ($) (1) ($) (2) (3) (# of Shares) ($)(2)
(4)
K.M. Hudson 1994 175,000 175,000 - 25,000 400,366(5)
President 1993 - - - - -
& Chief 1992 - - - - -
Executive Officer
P.G. Gengler 1994 446,667 - 10,084 - 169,975 (6)
Retired 1993 331,250 172,250 6,725 10,000 157,710 (6)
President 1992 316,250 170,775 - 13,000 -
& Chief
Executive Officer
D.P. DeLuca 1994 182,750 127,925 2,825 2,500 18,161 (7)
Senior Vice 1993 174,000 69,426 2,340 2,500 32,151 (7)
President, 1992 166,000 69,720 - 3,500 -
Treasurer &
Chief Financial
Officer
R.L. Fisk 1994 182,577 127,804 3,097 2,500 15,462
Vice President, 1993 173,846 63,280 2,375 2,500 14,421
Direct Marketing 1992 166,000 62,748 - 3,500 -
G.W. Gyllstrom 1994 164,384 110,006 3,511 2,500 12,968
Vice President, 1993 155,962 51,311 2,435 2,500 12,258
Domestic 1992 127,707 76,007 - 2,000 -
T.L. Turner 1994 128,519 83,126 5,954 2,000 9,716
Vice President, 1993 123,154 44,828 3,734 2,000 9,230
Administration 1992 118,988 42,479 - 2,500 -
(1) Reflects bonus earned during the fiscal year which was paid during
the next fiscal year.
(2) In accordance with SEC transitional rules, amounts have not been
included for Fiscal 1992.
(3) The amounts shown represent costs to the Company for expenses
associated with the use of a company car.
(4) All other compensation for fiscal 1994 for Mrs. Hudson, and
Messrs., Gengler, DeLuca, Fisk, Gyllstrom and Turner, 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, $18,567, $14,620, $14,606, $12,652,
and $9,082 and (ii) the cost of group term life insurance for each
named executive officer of $660, $5,608, $1,022, $856, $316 and
$634.
All other compensation for fiscal 1993 for Messrs. Gengler, DeLuca,
Fisk, Gyllstrom and Turner, respectively, includes: (i) matching
contributions to the Company's Profit Sharing and Employee Thrift
(i.e. "BradyGold") Plan for each named executive officer of
$17,752, $13,920, $13,858, $11,997, $8,652 and (ii) the cost of
group term life insurance for each named executive officer of
$4,958, $931, $563, $261, and $578.
(5) Includes $386,706 accrued, but not paid, for the Fiscal 1994
portion of a Supplemental Retirement Plan.
(6) Fiscal 1994 includes $145,800 accrued, but not paid, for the
current year portion of a Supplemental Executive Retirement Plan.
Fiscal 1993 includes $135,000 accrued, but not paid, for that
year's portion of the same Plan.
(7) Includes relocation expenses of $2,519 in Fiscal 1994 and $17,300
in Fiscal 1993.
STOCK OPTIONS
The following tables summarize option grants and exercises during
Fiscal 1994 to or by the executive officers named in the Summary
Compensation Table above, and the value of unexercised options held by
such persons at July 31, 1994. Stock Appreciation Rights are not
available under any of the Company's plans.
OPTION GRANTS IN FISCAL 1994
Individual Grants
% of Total
Options
Granted to
Options Employees Exercise
Granted in Price (2) Expiration
Name (#) (1) Fiscal 1994 ($/Sh) Date
K.M. Hudson 25,000 31.9% $43.000 01/06/2004
P.G. Gengler - - - -
D.P. DeLuca 2,500 3.2% $36.500 10/28/2003
R.L. Fisk 2,500 3.2% $36.500 10/28/2003
G.W. Gyllstrom 2,500 3.2% $36.500 10/28/2003
T.L. Turner 2,000 2.6% $36.500 10/28/2003
Potential Realizable Value
at Assumed Rates of
Stock Price Appreciation (3)
0% 5% 10%
$43 $70 $111 1/2
Name ($) ($) (6) ($) (6)
K.M. Hudson $0 $675,000 $1,712,500
P.G. Gengler - - -
D.P. DeLuca $0 $ 83,750 $ 187,500
R.L. Fisk $0 $ 83,750 $ 187,500
G.W. Gyllstrom $0 $ 83,750 $ 187,500
T.L. Turner $0 $ 67,000 $ 150,000
All Shareholders' Gains
(increase in market value of W.H. Brady Co.
Common Stock at assumed rates of stock price
appreciation) (4) (6)........................$147,289,374 $373,678,597
All Optionees' Gains
(as a percent of all shareholders' gains) (5) (6)...1.67% 1.53%
(1) The options granted to Mrs. Hudson were dated January 7, 1994 and
became exercisable July 7, 1994. The options granted to the other
named executives were dated October 29, 1993 and become exercisable
as follows: 33 1/3% of the shares on October 29, 1994; 33 1/3% of
the shares in October 29, 1995; and 33 1/3% of the shares on
October 29, 1996. All these options have a term of ten years.
(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 about 0%, 63% and 159%
for assumed annual rates of appreciation of 0%, 5% and 10%,
respectively, compounded annually for the ten year option term.
These calculations are based upon $43.00 exercise price on options
granted to Mrs. Hudson.
(4) Calculated from the $43.00 exercise price applicable to the
options granted to Mrs. Hudson in fiscal 1994 based on the
5,455,162 shares of Class A Common Stock outstanding on January 7,
1994.
(5) Represents potential realizable value for all options granted in
fiscal 1994 as compared to the increase in market value of W.H.
Brady Co. Class A Common Stock at assumed rates of stock price
appreciation.
(6) The Company disavows the ability of any valuation model to predict
or estimate the Company's future stock price or to place a
reasonably accurate present value on these options because any
model depends on assumptions about the stock's future price
movement that the Company is unable to predict.
AGGREGATED OPTION EXERCISES IN FISCAL 1994
AND VALUE OF OPTIONS AT END OF FISCAL 1994
Number of Unexercised
Shares Options at
Acquired July 31, 1994
on Value
Exercise Realized Exercisable Unexercisable
Name (#) ($) (#) (#)
K.M. Hudson 0 $ 0 25,000 0
P.G. Gengler 25,000 $364,688 13,666 4,334
D.P. DeLuca 0 $ 0 7,167 5,333
R.L. Fisk 0 $ 0 3,167 5,333
G.W. Gyllstrom 0 $ 0 7,167 4,833
T.L. Turner 4,000 $ 56,500 2,333 4,167
Value of Unexercised
In-the-Money Options
at July 31, 1994 (1)
Exercisable Unexercisable
Name ($) ($)
K.M. Hudson $112,500 $ 0
P.G. Gengler $168,592 $76,658
D.P. DeLuca $157,926 $65,419
R.L. Fisk $ 49,926 $65,419
G.W. Gyllstrom $136,738 $56,575
T.L. Turner $ 36,405 $50,581
(1) Represents the closing price for the Company's Class A Common Stock
on July 31, 1994 of $47.50 less the exercise price for all
outstanding exercisable and unexercisable options for which the
exercise price is less than such closing price.
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, 1989 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.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
W.H. Brady Co. versus Published Indices (S&P 500 and NASDAQ-US)
1989 1990 1991 1992 1993 1994
Brady $100 $ 96 $144 $127 $131 $179
S&P 500 $100 $105 $118 $133 $145 $152
NASDAQ US $100 $ 98 $116 $136 $166 $170
*$100 invested on 7/31/89 in stock or index.
Includes reinvestment of dividends.
Fiscal year ending July 31.
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 $1,000 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.
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 1994, 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
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.
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 cash incentive compensation
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.
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 1994, 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 INCENTIVE COMPENSATION
The Incentive Compensation 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 is designed to reward superior results and performance
with superior compensation. The Bonus Plan has both an objective and
subjective element. Components of the objective element include the
Company's profitability and sales growth. Components of the subjective
element include the achievement of certain agreed upon individual 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.
COMPLIANCE WITH NEW 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 $175,000 in base salary from January 1, 1994
through the end of the fiscal year. She was paid a bonus attributable
to Fiscal 1994 of $175,000. Mrs. Hudson was awarded the maximum bonus
because certain objective sales growth and profitability goals were met,
as well as criteria for the subjective portion of the bonus including:
(i) re-energizing the Company to drive growth and global expansion
(ii) increasing cross-divisional cooperation and teamwork
(iii) continuing emphasis on earnings while refocusing on asset
utilization
(iv) facilitating the Company's long-range strategic planning
Included in the terms of Mrs. Hudson's employment offer was a
granting of options to purchase 25,000 shares of Class A Common Stock.
Although he retired in December 1993, base salary was owed to Mr.
Gengler for the entire fiscal year. Mr. Gengler received $307,084 in
base salary in Fiscal 1994. In addition, $139,583 base salary owed to
Mr. Gengler for the period August 1994 to December 1994 was accelerated
and paid in July 1994. Mr. Gengler did not receive a bonus in Fiscal 1994.
No stock option grants were awarded to Mr. Gengler in Fiscal 1994.
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
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, 1994.
Amount of
Title of Name and Address of Beneficial Percent of
Class Beneficial Owner Ownership Ownership
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
The trustees of both trusts are Robert C. Buchanan, Irene B. Brady,
Roger D. Pierce, Peter J. Lettenberger, and Michael S. Joyce, 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.
(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, 1994. Except as otherwise indicated, all shares are
owned directly.
Title Name of Beneficial Amount of Percent
of Owner & Nature of Beneficial of
Beneficial Ownership Ownership Ownership
Class A Peter J. Lettenberger (1)(2)(3) 1,109,940 20.3%
Common Robert C. Buchanan (1)(4) 848,681 15.5%
Stock Roger D. Peirce (1) 848,431 15.5%
Michael S. Joyce (1) 848,431 15.5%
Elizabeth B. Lurie (2)(5) 568,415 10.4%
William H. Brady III (6) 345,824 6.3%
Katherine M. Hudson (7) 25,013 0.5%
Paul G. Gengler (8) 14,486 0.3%
Richard A. Bemis 500 *
Gary R. Nei 500 *
All Officers and Directors
as a Group (19 persons)(9) 1,843,839 33.7%
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%
Michael S. Joyce (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%
Stock Michael S. Joyce (1) 1,920 48.2%
Elizabeth B. Lurie (2)(5) 1,066 26.8%
William H. Brady III (2)(6) 998 25.1%
All Officers and Directors
as a Group 3,221 80.8%
1979 Series William H. Brady III (2)(6) 8,071 36.7%
Cumulative Elizabeth B. Lurie (2)(5) 8,071 36.7%
Preferred Peter J. Lettenberger (2) 5,529 25.2%
All Officers and Directors
as a Group 10,613 38.3%
6% Peter J. Lettenberger (2) 2,600 100%
Cumulative Elizabeth B. Lurie (2) 2,600 100%
Preferred William H. Brady III (2) 2,600 100%
Stock, All Officers and Directors
1972 Series as a Group (2) 2,600 100%
* Indicates less than one tenth of one percent.
(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 Robert C. Buchanan, Irene B. Brady, Roger D. Peirce, Peter J.
Lettenberger, and Michael S. Joyce, 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 Trusts;
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.
(2) William H. Brady III, 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 1,567.5 shares of Class A Common Stock.
(4) In addition to shares beneficially owned as a trustee of the
Trusts, Mr. Buchanan owns directly 250 shares of Class A Common Stock.
(5) In addition to the shares owned as a trustee of the 1986
Trust and as a director of the Foundation, Mrs. Lurie owns directly
145,740 shares of Class A Common Stock, or 2.7% 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 162,734 shares
of the Class A Common Stock, or 3.0% of the number of such shares
outstanding. She disclaims ownership of these shares.
(6) In addition to shares owned as a director of the Foundation,
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.
(7) Mrs. Hudson owns 12.8427 shares of Class A Common Stock
indirectly through an employee benefit plan and holds a vested option to
acquire an additional 25,000 shares of Class A Common Stock.
(8) Mr. Gengler owns 520 shares of Class A Common Stock directly
and his spouse owns 300 shares of Class A Common Stock. He also
beneficially owns 13,666 shares of Class A Common Stock through vested
options. He holds options for an additional 4,334 shares of Class A
Common Stock that fully vest by October 1995.
(9) The amount shown for all officers and directors as a group
(19 persons) includes options to acquire a total of 73,566 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
Under terms of an employment agreement with William H. Brady, Jr.,
the Company paid approximately $24,000 to Mr. Brady's beneficiaries in
1994. No further liabilities exist under the terms of this agreement.
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 23 through 35 of the Company's 1994 Annual
Report is incorporated herein by reference.
2) Consolidated Financial Statement Schedules--
Schedule IV Indebtedness to Related Parties - Not
Current
Schedule V Property, Plant and Equipment
Schedule VI Accumulated Depreciation and Amortization
of Property, Plant and Equipment
Schedule VIII Valuation and Qualifying Accounts
Schedule X Supplementary Income Statement Information
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.
10.1(1) Employment Agreement dated November 3, 1975, between W.H.
Brady Co. and William H. Brady, Jr.
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 Incentive Compensation 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 Supplemental Executive Retirement Plan between W.H. Brady
Co. and Katherine M. Hudson
10.11 Supplemental Executive Retirement Plan dated September 23,
1994 between W.H. Brady Co. and Donald P. DeLuca.
13.1 Annual Report to Shareholders for year ended July 31,
1994.
18.1(3) Letter regarding change in accounting method.
22.1 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.
W.H. BRADY CO. AND SUBSIDIARIES
SCHEDULE IV - INDEBTEDNESS TO RELATED PARTIES - NOT CURRENT
Balance at Additions to Reductions of Balance at
Category Beginning of Period Indebtedness Indebtedness End of
(Dollars in Thousands) Period
Year ended July 31, 1992:
Management $11945 $2261 $1285 $12921
Directors 2257 319 203 2373
Trustees 56 0 22 34
Former
Chairman 111 0 71 40
Total $14369 $2580 $1581 $15368
Year ended July 31, 1993:
Management $12921 $1179 $1532 $12568
Directors 2373 525 506 2392
Trustees 34 0 16 18
Former
Chairman 40 0 16 24
Total $15368 $1704 $2070 $15002
Year ended July 31, 1994:
Management $12568 $2468 $1775 $13261
Directors 2392 349 207 2534
Trustees 18 0 18 0
Former
Chairman 24 0 24 0
Total $15002 $2817 $2024 $15795
Note: The indebtedness represents amounts due under different deferred
compensation plans.
Reductions of indebtedness are payments to retired or deceased
participants of the various categories.
W.H. BRADY CO. AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
Bal. at Other Bal. at
Beginning Additions Retire- Deduc- End of
of Period At Cost ments tions(4) Period
Classification (3) (Dollars in thousands)
Year Ended July 31, 1992:
Land $ 2967 $ 2243 $ (1) $ 5211
Buildings & Improvements 28770 8533 (437) 37740
Machinery & Equipment 56980 14820 1946 $3875 65979
Construction in Progress 11104 (1522) (317) 9899
$ 99821 $24074 $ 1191(1)(2) $3875 $118829
Year Ended July 31, 1993:
Land $ 5211 -- $ 547 $ 4664
Buildings & Improvements 37740 $ 4544 4811 37473
Machinery & Equipment 65979 13773 10950 68802
Construction in Progress 9899 (6037) 55 3807
$118829 $12280 $16363 (1)(2) $114746
Year Ended July 31, 1994:
Land $ 4664 -- $ (25) 4689
Buildings & Improvements 37473 $ 666 (292) 38431
Machinery & Equipment 68802 8661 4887 72576
Construction in Progress 3807 (2861) 7 939
$114746 $ 6466 $ 4577 (2) $116635
(1) Includes $1,199 (1992) and $13,873 (1993) of retirements due to
sale of business units.
(2) Includes foreign currency translation adjustments of
$(1,607)(1992), $2,535 (1993) and $(971)(1994).
(3) Cost is being depreciated using the straight line method over the
estimated useful lives, which range as follows:
Buildings & Improvements 10 to 40 years
Machinery & Equipment 3 to 10 years
(4) Nonrecurring charge - See Note 2 to the Consolidated Financial
Statements.
W.H. BRADY CO. AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
Additions
Bal. at Charged to Bal. at
Beginning Costs and Retire- End of
Of Period Expenses ments Period
(Dollars in Thousands)
Classification
Year Ended July 31, 1992:
Buildings & Improvements $10616 $1095 $ 11 $11700
Machinery & Equipment 29817 7355 1510 35662
$40433 $8450 $1521 (1)(2) $47362
Year Ended July 31, 1993:
Buildings & Improvements $11700 $1356 $1036 $12020
Machinery & Equipment 35662 8492 8790 35364
$47362 $9848 $9826 (1)(2) $47384
Year Ended July 31, 1994:
Buildings & Improvements $12020 $1321 $ (58) $13399
Machinery & Equipment 35364 8004 4475 38893
$47384 $9325 $4417 (1) $52292
(1) Includes foreign currency translation adjustments of $(876)(1992),
$1,329 (1993) and $(371)(1994).
(2) Includes $1,103 (1992) and $5,486 (1993) of retirements due to
sale of business units.
W.H. BRADY CO. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
Year ended July 31,
1992 1993 1994
(Dollars in Thousands)
Description
Valuation accounts deducted in balance
sheet from assets to which they apply--
Accounts receivable--allowance for losses:
Balances at beginning of period $ 987 $1320 $1247
Additions--Charged to expense 750 758 725
Deductions--Bad debts written off, net of
recoveries (417) (831) (407)
Balances at end of period $1320 $1247 $1565
W.H. BRADY CO. AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
Charged to costs and expenses
Year ended July 31,
1992 1993 1994
(Dollars in thousands)
Maintenance and repairs $ 4196 $ 4344 $ 3767
Advertising costs $20442 $21234 $27303
Note: Amounts for taxes other than payroll taxes and income taxes,
amortization of intangible assets, and royalties are not
presented, as such amounts are less than one percent of net
sales.
DELOITTE & TOUCHE LLP
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-4496
Telephone (414) 271-3000
INDEPENDENT AUDITORS' CONSENT
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,
1994, 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, 1994.
/S/ Deloitte & Touche LLP
Milwaukee, Wisconsin
October 26, 1994
Deloitte & Touche LLP
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-4496
Telephone (414) 271-3000
INDEPENDENT AUDITOR'S 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, 1994 and 1993 and for each of the three years in
the period ended July 31, 1994, and have issued our report thereon dated
September 12, 1994; such consolidated financial statements and report are
included in your 1994 Annual Report to Stockholders and are incorporated
herein by reference. Our audits also included the consolidated financial
statement schedules of W.H. Brady Co. and subsidiaries, listed in Item 14.
These consolidated financial statement schedules are 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
schedules, when considered in relation to the basic financial statements
taken as a whole, present fairly in all material respects the information
set forth therein.
/S/ Deloitte & Touche LLP
Milwaukee, Wisconsin
September 12, 1994
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
14th day of October, 1994.
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.
/S/ K.M. Hudson President and Director 10/14/94
K.M. Hudson (Principal Executive Officer)
/S/ P.J. Lettenberger Director 10/14/94
P.J. Lettenberger
/S/ R.A. Bemis Director 10/14/94
R.A. Bemis
Director
W.H. Brady III
Director
E.B. Lurie
Director
F.W. Harris
/S/ R.C. Buchanan Director 10/14/94
R.C. Buchanan
/S/ R.D. Peirce Director 10/14/94
R.D. Peirce
/S/ M.S. Joyce Director 10/14/94
M.S. Joyce
Director
G.E. Nei
SCHEDULE OF SUBSIDIARIES OF W.H. BRADY CO.
Name Jurisdiction of Incorporation
Brady Coated Products, Inc. Wisconsin
Brady Financial Co. Delaware
Brady International Co. Wisconsin
Brady International Sales, Inc. U.S. Virgin Islands
Brady Medical Products Co. Wisconsin
Brady Service Co. Wisconsin
Brady USA, Inc. Wisconsin
Nippon Brady K.K. Japan
Revere-Seton Inc. Canada
Seton GmbH Germany
Seton, Ltd. England
Seton S.A. France
Tricor Direct Inc./Doing
Business As Delaware
Seton
Seton Name Plate Company
Worldmark of Wisconsin Inc. Delaware
W.H. Brady, Pty. Ltd. Australia
W.H. Brady, N.V. Belgium
W.H. Brady, Inc. Canada
W.H. Brady, Ltd. England
W.H. Brady, S.A.R.L. France
W.H. Brady, GmbH Germany
W.H. Brady, Pte. Ltd. Singapore
Brady AB Sweden