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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
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, 1999
Commission File Number 0-12730
BRADY CORPORATION
(Exact name of registrant as specified in charter)
WISCONSIN 39-0178960
(State of Incorporation) (IRS Employer Identification No.)
6555 WEST GOOD HOPE ROAD
MILWAUKEE, WI 53223
(Address of Principal Executive Offices and Zip Code)
(414) 358-6600
(Registrant's Telephone Number)
Securities Registered Pursuant to Section 12(b) of the Act:
Class A Nonvoting Common Stock, Par Value $.01 per share
Securities Registered Pursuant to Section 12(g) of the Act:
None
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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 [ ] No [X]
As of September 30, 1999, there were outstanding 20,855,091 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
Brady Corporation 1999 Annual Report, Incorporated into Part II & IV
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INDEX
PAGE
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PART I
ITEM 1. BUSINESS
General Development of Business........................... I-1
Financial Information About Industry Segments............. I-1
Narrative Description of Business:
Overview............................................... I-1
Business Strategy...................................... I-1
Growth Strategy........................................ I-2
Products............................................... I-2
Marketing and Sales.................................... I-5
Manufacturing Process and Raw Materials................ I-5
Technology and Product Development..................... I-6
International Operations............................... I-6
Competition............................................ I-6
Backlog................................................ I-7
Environment............................................ I-7
Employees.............................................. I-7
Acquisitions........................................... I-7
Financial Information About Foreign and Domestic Operations
and Export Sales.......................................... I-8
ITEM 2. PROPERTIES.......................................... I-8
ITEM 3. LEGAL PROCEEDINGS................................... I-8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS................................................... I-8
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS....................................... II-1
ITEM 6. SELECTED FINANCIAL DATA............................. II-1
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................... II-1
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........ II-1
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE....................... II-1
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT................................................ III-1
ITEM 11. EXECUTIVE COMPENSATION............................. III-3
Summary Compensation Table................................ III-3
Stock Options............................................. III-4
Common Stock Price Performance Graph...................... III-6
Compensation of Directors................................. III-6
Termination of Employment and Change in Control
Arrangements........................................... III-6
Restricted Stock.......................................... III-7
Compensation Committee Interlocks and Insider
Participation.......................................... III-7
Profit Sharing and Employee Thrift Plan................... III-7
Deferred Compensation Arrangements........................ III-8
Compensation Committee Report on Executive Compensation... III-9
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ III-11
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..... III-13
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS
ON FORM 8-K............................................... IV-1
SIGNATURES.................................................. IV-5
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PART I
Brady Corporation and Subsidiaries is referred to herein as the "Company"
or "Brady".
ITEM 1 BUSINESS
(a) General Development of Business
The Company, a Wisconsin corporation, currently operates 25 manufacturing
facilities worldwide. Nine are located in the United States, four in France, two
each in Australia and Canada and one each in Belgium, Brazil, England, Germany,
Italy, Japan, Korea and Singapore. The Company sells through subsidiaries or
sales offices in Australia, Belgium, Brazil, Canada, China, England, France,
Germany, Hong Kong, Italy, Japan, Korea, Malaysia, Mexico, the Philippines,
Singapore, Spain, Sweden, Taiwan and the United States. The Company's corporate
headquarters are located at 6555 West Good Hope Road, Milwaukee, Wisconsin
53223, and its telephone number is (414) 358-6600. The Company's Internet
address is http://www.bradycorp.com.
(b) Financial Information About Industry Segments
The information required by this Item is incorporated by reference to Note
7 to Notes to Consolidated Financial Statements on Pages 46 through 48 of the
Brady Corporation 1999 Annual Report.
(c) Narrative Description of Business
OVERVIEW
Brady Corporation is a leading international manufacturer and marketer of
high-performance identification solutions and specialty coated materials. The
Company's products consist of over 30,000 stock and custom items as well as
complete identification systems that are used by the Company's customers to
create a safer work environment for employees, improve production and operating
efficiencies and increase the utilization of assets through tracking and
inventory process controls. Major product categories include: industrial
identification and data collection products; safety and facility identification
products; and OEM components.
The Company's products are sold in a variety of markets, including
electrical, electronic, telecommunication, governmental, public utility,
computer, construction, transportation equipment and education. The need for the
Company's products is driven by specification of customer engineering
departments, by regulatory compliance requirements imposed by agencies such as
OSHA and the EPA, or by the need to identify and track assets, or to direct,
warn, inform, train and protect people. The Company manufactures and sells its
products domestically and internationally through multiple channels including
direct sales, distributor sales, mail-order catalog marketing and electronic
access through the Internet. The Company has a broad customer base, which in
fiscal 1999 consisted of more than 300,000 companies, with the largest customer
representing less than 6% of net sales. Sales from international operations
represented 44.6%, 43.5% and 42.5% of net sales in fiscal 1999, 1998 and 1997,
respectively.
BUSINESS STRATEGY
Brady's objective is to be the leading source of high-performance
identification products and specialty coated materials to niche markets
worldwide. The Company expects to accomplish this objective by offering a broad
range of high-quality, innovative products to a widely diversified customer base
in a prompt and responsive manner. Underlying the Company's business strategy is
a Company-wide commitment to enhancing shareholder value. The Company's
long-term focus on activities that will create sustainable value for its
shareholders drives decision making at all levels of the Company. The Company's
employees participate in an incentive plan that is focused upon the creation of
shareholder value. This incentive plan serves to
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motivate employees, foster a team-oriented work environment and maximize the
utilization of assets. Key elements of the Company's business strategy include:
Product innovation. The Company continually seeks to improve existing
products and to develop innovative products to satisfy its customers'
requirements and expectations. Brady's commitment to product innovation is
reflected in research and development efforts that include approximately 150
employees primarily dedicated to research and development activities in the
United States, Canada, Belgium, France and Singapore.
Breadth of product line. The Company's products include over 30,000 stock
and thousands of custom items. The number of products offered allows Brady to
serve as a one-stop shopping network for its customers. Additionally, management
believes that the Company provides a broader range of identification solutions
than any of its competitors.
Focus on customers. The Company seeks to provide "seamless" customer
service and to offer rapid response to customer orders and inquiries. To meet
this goal, the Company has streamlined its manufacturing processes to shorten
lead-times and has increased its investment in telecommunications and management
information systems worldwide.
Niche markets. The Company strives to be a major player in niche markets
that allow the Company to leverage its capabilities in specialty materials,
die-cut parts and printing systems. By focusing on specific markets and
value-added product applications, the Company has established leading positions
in the electrical and safety markets with certain of its products such as wire
markers, pipe markers and safety signs.
GROWTH STRATEGY
The major elements of the Company's strategy for growth include:
New products and new markets. The Company, through its strong product
innovation and development activities, seeks continually to introduce new
products and explore additional applications for its products in existing and
new markets.
Increased market penetration. The Company seeks to increase market
penetration in existing domestic and international markets through existing
distribution channels and strong sales and marketing efforts. To achieve this
objective, the Company is expanding its current sales force and is pursuing
additional niche distribution channels.
Geographic expansion. Sales from Brady's international operations have
increased from $50,707,000 or 26.5% of net sales in fiscal 1990 to $209,863,000,
or 44.6%, of net sales in fiscal 1999. The Company believes that international
markets continue to represent a significant growth opportunity. Accordingly, the
Company is actively seeking to increase its penetration in established markets
in Europe, Asia/Pacific and Canada and to enter new emerging markets elsewhere
in the Pacific Rim and in Latin America.
Strategic acquisitions and joint ventures. While the Company intends to
continue pursuing internal growth through the above strategies, the Company also
intends, where practical, to fill product lines or market sectors, open new
geographic markets and strengthen systems offerings through the pursuit of
strategic acquisitions and joint ventures. During the last three years, Brady's
growth has occurred through strategic acquisitions, innovative product
development and improvement, market expansion and increased market penetration.
PRODUCTS
The Company's products consist of over 30,000 stock and thousands of custom
items as well as complete identification systems that are used by the Company's
customers to create a safer work environment for employees, improve product and
operating efficiencies and increase the utilization of assets through tracking
and inventory process controls. Major product categories include: industrial
identification and data-collection products including wire and cable markers,
high-performance labels, stand-alone printing systems, barcode and other
software, radio frequency identification tags and readers and other automatic
identification and data
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collection systems; safety and facility identification products including signs,
pipe and valve markers, storage markers, asset identification tags,
lockout/tagout products, traffic-control products, printing systems and
software; and specialty tapes and die-cut materials.
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 most significant types of products are described below.
INDUSTRIAL IDENTIFICATION AND DATA-COLLECTION PRODUCTS
Wire and Cable Markers
Brady manufactures a broad range of wire- and cable-marking products. These
products help mark and identify wires, cables and other potential hazards. Such
products may be used in virtually every industrial, electrical and
telecommunications market to specify the origination and/or destination of
wiring and to facilitate repair or maintenance of equipment and wiring systems.
High Performance Labels
Brady produces a complete line of label materials to meet customers' needs
for identification that performs under harsh or sensitive conditions. Brady
prints stock and custom labels and also sells unprinted materials to enable
customers to print their own labels on-site, on-demand, using thermal transfer,
laser, dot matrix and inkjet printers. Brady labels range from
static-dissipative labels for use on electronic components to labels that
withstand extreme conditions, such as 1000 degrees Fahrenheit temperatures and
harsh chemicals.
Software and Printing Systems
The Company designs and produces various computer software, industrial
thermal-transfer and dot matrix printers and other electromechanical devices to
serve the growing and specialized needs of customers. Industrial labeling
systems, software, tapes, ribbons and label stocks provide customers with the
resources and flexibility to produce signs and labels on demand at their site.
Automatic Identification and Data-Collection Systems
Brady's automatic identification and data collection solutions include
bar-code label generating software; bar-code and radio frequency scanners; tags;
and labels to enable accurate tracking of manufacturing, warehousing, receiving
and shipping data. The Company's software applications, fixed station terminals,
high-speed printers and associated customized consumable products allow its
customers to have a higher degree of knowledge and control over production,
asset management and all phases of inventory control, including receiving,
warehousing, work-in-process, finished goods and shipping.
SAFETY AND FACILITY IDENTIFICATION PRODUCTS
Signs
The Company manufactures safety and informational 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 issued by the
National Safety Council, OSHA and a variety of industry associations in the
United States and abroad. The Company's sign products are categorized by type of
message to be conveyed, including admittance, directional and exit signs;
electrical hazard warnings; energy conservation messages; fire protection and
fire equipment signs; hazardous waste labels; hazardous and toxic material
warning signs; personal hazard warnings; housekeeping and operational warnings;
pictograms; radiation and laser signs; safety practices signs and regulatory
markings.
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Pipe and Valve Markers
The Company manufactures both self-adhesive and mechanically applied stock
and custom-designed pipe markers and plastic and metal valve tags for the
identification of pipes and control valves. These products are designed to help
identify and provide information as to the contents, direction of flow and
special hazardous properties of materials contained in piping systems, and to
facilitate repair or maintenance of the system.
Storage Markers
The Company produces signs, self-adhesive and self-aligning die cut numbers
and letters used for the systematic identification of facilities, bins and
shelving. Storage marker products are primarily used by industrial companies in
factories, warehouses, stockrooms and other facilities.
Asset Identification Markers
Brady offers a wide range of asset identification products. These include
self-adhesive or mechanically mounted labels or tags made of aluminum, brass,
stainless steel, polycarbonate, vinyl, polyester, mylar and paper. These
products are also offered in tamper-evident varieties.
Lockout/Tagout Products
Brady offers a wide variety of lockout/tagout products. Under OSHA
regulations, all energy sources must be "locked out" while machines are being
serviced or maintained to prevent accidental engagement and injury. The
Company's products allow its customers to comply with these regulations and to
ensure worker safety for a wide variety of energy and fluid transmission systems
and operating machinery.
Traffic Control Products
The Company offers a wide variety of traffic-control devices, including
directional and warning signs, barriers, cones and other devices.
Other
The Company also offers sign-making kits, stenciling materials, barricading
products, visual warning systems, floor-marking products, safety hard-hat
labels, safety badges, photo identification kits, ergonomic products, first aid
cabinets/kits, body harnesses, anti-slip coatings and alarm security systems,
among others.
SPECIALTY MATERIALS
Specialty Tapes
Brady manufactures specialty tapes and related products that are used in a
variety of audio, video and computer applications. These specialty 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. Its data-storage products include audio and video cassette splicing
tapes.
Die-Cut Materials
The Company's precision die-cut materials are used to seal, insulate,
protect, shield or provide other mechanical performance properties in the
assembly of electronic, telecommunications and other equipment, including
cellular phones, pagers, computer hard drives, two-way radios, global
positioning systems, household appliances and medical devices.
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Graphics Products
Brady serves the identification and information needs of various
non-industrial markets with a variety of easy-to-use printing systems and
consumable supplies. It provides lettering and labeling systems, poster
printers, laminators and supplies to education, government, training and legal
markets.
OTHER PRODUCTS
The Company also sells a variety of other products, none of which
individually accounts for a material portion of its sales, including: hospital
and clinical labels, packing and shipping goods, name plates and quality and
production control products, among others.
MARKETING AND SALES
The Company's products are sold in a wide variety of markets including
electrical, electronic, telecommunications, governmental, public utility,
computer, construction, transportation equipment and education. Brady has a
diverse customer base that consisted of over 300,000 customers in fiscal 1999.
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 not have
a material adverse effect upon the Company's business. In fiscal 1999, no single
customer accounted for more than 6% of the Company's net sales.
The Company seeks to offer the right product with rapid response times and
superior service so that it can provide solutions to the customer that are
better, faster and more economical than those available from competitors. The
Company markets and sells its products domestically and internationally through
multiple channels including direct sales, distributor sales, mail-order catalog
marketing and electronic access through the Internet. The Company currently has
over 4,000 established relationships with a broad range of electrical, safety,
industrial and other domestic and international distributors. To support its
distributor network, the Company employs a sales force of over 300 people. The
Company's sales force seeks to establish and foster ongoing relationships with
the end-users (and distributors) by providing technical support and product
application advice.
The Company direct markets its products and those of other manufacturers by
catalog sales in both domestic and international markets. Such products include
industrial and facility identification products, safety and regulatory
compliance products and OEM component products, among others. Catalog operations
are conducted through offices in the U.S., Australia, Brazil, Canada, England,
France, Germany and Italy and include foreign-language catalogs.
MANUFACTURING PROCESS AND RAW MATERIALS
The Company manufactures the majority of the products it sells, while
purchasing certain items from other manufacturers. 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 uses. The
Company's manufacturing processes include compounding, coating, converting,
software publishing and printer engineering and assembly. The compounding
process involves the mixing of chemical batches for primers, top coatings and
adhesives, in solvent- or water-based materials. The coatings and adhesives are
applied to a wide variety of materials including polyester, polyimide, cloth,
paper, metal and metal foil. The converting process may include embossing,
perforating, laminating, die cutting or slitting. The Company also utilizes
various graphic techniques to print or mark the materials as required.
The Company seeks to optimize the performance, quality and durability of
its products, while continually improving manufacturing processes, shortening
lead times and lowering manufacturing costs. The Company produces the majority
of its own adhesive stocks and top-coated materials through an integrated
manufacturing process. These integrated manufacturing processes permit it to
achieve greater flexibility in product design and manufacture and to improve its
ability to provide specialized products designed to meet the needs of specific
applications. Brady's "cellular" manufacturing processes and "just-in-time"
inventory control allow it to attain profitability in small orders by
emphasizing flexibility and the maximization of assets through quick
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turnaround and delivery. Most of the Company's manufacturing facilities have
received ISO 9001 or 9002 certification.
The materials used in the products manufactured by the Company consist
primarily of plastic sheets and films (primarily polyesters and polycarbonates),
paper, 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.
TECHNOLOGY AND PRODUCT DEVELOPMENT
The Company focuses its research and development efforts on applications in
the science of surface chemistry, such as 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 that
are adhesively fastened.
The Company possesses patents covering various aspects of adhesive
chemistry, electronic circuitry, computer-generated wire markers, and systems
for aligning letters and patterns. Although 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 such patents. The Company's business
is not dependent on any single patent or group of patents.
The Company conducts much of its research and development activities at its
approximately 39,600 sq. ft. Frederic S. Tobey Research and Innovation Center in
Milwaukee, Wisconsin. The Company spent approximately $17,700,000, $20,300,000,
and $16,300,000 in fiscal 1999, 1998, and 1997, respectively, on its research
and development activities, all of which were Company sponsored. In fiscal 1999,
approximately 150 employees were engaged in research and development activities
for the Company. Additional research projects were conducted under contract with
universities, other institutions and consultants.
INTERNATIONAL OPERATIONS
In Fiscal 1999, 1998, and 1997, sales from international operations
accounted for 44.6%, 43.5%, and 42.5%, respectively, of the Company's net sales.
The Company's global infrastructure now supports sales and operations through
subsidiaries in Australia, Belgium, Brazil, Canada, England, France, Germany,
Italy, Japan, Korea, Mexico, Singapore, Spain and Sweden and sales offices in
China, Hong Kong, Malaysia, the Philippines and Taiwan. Several of these
locations manufacture or have the capability to manufacture certain of the
products they sell. The Company acquired or opened new operations in Australia,
Brazil, Canada, China, England, France, Korea, Malaysia, Mexico, the Philippines
and Taiwan in the last three years. The Company expects to continue to expand
its international operations as appropriate.
COMPETITION
The markets for most of the Company's products are competitive. The Company
believes that it is the leading domestic producer of self-adhesive wire markers,
safety signs, pipe markers, audio and video splicing tapes, precision die-cut
materials and bar-code label generating software. The Company competes for
business principally on the basis of product quality, performance, range of
products offered 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 some competing products as part of their product line. A number of the
Company's competitors are larger than the Company and have greater resources.
Notwithstanding the resources of these competitors, management believes that the
Company provides a broader range of identification solutions than any of its
competitors.
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BACKLOG
As of July 31, 1999, the amount of the Company's backlog orders believed to
be firm was $22.3 million. This compares with approximately $20.4 million and
$19.9 million of backlog orders as of July 31, 1998 and 1997, respectively.
Average delivery time for the Company's orders varies from one day to 12 weeks,
depending on the type of product, and whether the product is stock or custom
designed and manufactured.
ENVIRONMENT
At present, the manufacturing processes for the Company's adhesive-based
products utilize certain evaporative 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. Management believes the Company is substantially in compliance
with all environmental regulations.
EMPLOYEES
As of July 31, 1999, the Company employed approximately 2,700 individuals.
The Company has never experienced a material work stoppage due to a labor
dispute, is not a party to any labor contract and considers its relations with
employees to be excellent. To meet present and future labor requirements, the
Company maintains an active college recruiting program for sales, technical and
administrative personnel.
ACQUISITIONS
Effective August 29, 1996, the Company entered into a joint venture, W.H.
Brady Korea Co. Ltd., in Okcheon, Korea. Brady gained 100 percent ownership of
the company, now named Brady Korea, Ltd., in September 1998. The company
produces labels and markets printers and other Brady products.
Effective April 30, 1997, the Company acquired the common stock of Signals
S.A. located in La Rochelle, France, a marketer of safety and facility
identification products, for cash of approximately $9,600,000.
Effective March 9, 1998, the Company acquired the common stock of
Techniques Avancees located in Auch, France, a bar-code-labeling-software
developer, for cash of $10,735,000 and a payable of $1,030,000.
Effective April 30, 1998, the Company acquired the common stock of GrafTek
Inc. located in Toronto, Ontario, Canada, a bar-code-labeling-software
developer, for cash of $8,528,000 and a payable of $933,000.
Effective August 11, 1998, the Company acquired the common stock of VEB
Sistemas de Etiquetas Ltda. located in Sao Paulo, Brazil, an industrial label
manufacturer, for cash of approximately $4,400,000.
Effective March 25, 1999, the Company acquired the assets of Barcodes West
Inc. located in Seattle, Washington, a label manufacturer and software and
service provider, for cash of $5,757,000.
Effective May 7, 1999, the Company acquired the common stock of Visi Sign
Pty. Ltd. located in Victoria, Australia, a manufacturer of identification
products, for cash of approximately $1,396,000. The purchase price of this
acquisition is subject to change based on postclosing adjustments.
Effective July 7, 1999, the Company acquired the common stock of Holman
Groupe S.A. located in Rungis, France, an automatic identification and
application specialist, for cash of approximately $5,343,000 and a payable of
approximately $554,000. The purchase price of this acquisition is subject to
change based on postclosing adjustments.
Effective July 30, 1999, the Company acquired the common stock of the
graphics division of SOFT S.A., located in Lyon, France, a developer and
distributor of printing systems, for cash of approximately $14,044,000. The
purchase price of this acquisition is subject to change based on postclosing
adjustments.
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Effective September 3, 1999, the Company acquired certain assets of 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 postclosing adjustments.
(d) Financial Information about Foreign and Domestic Operations and Export Sales
See Note 7 to Notes to Consolidated Financial Statements on Pages 46
through 48 of the Brady Corporation 1999 Annual Report.
ITEM 2 PROPERTIES
The Company currently operates 25 manufacturing facilities. Nine are
located in the United States, four in France, two each in Australia and Canada
and one each in Belgium, Brazil, England, Germany, Italy, Japan, Korea and
Singapore. The Company's primary research facility of approximately 39,600
square feet is located in Milwaukee, Wisconsin. The Company's present operating
facilities contain a total of approximately 1,308,000 square feet of space, of
which approximately 551,000 square feet is leased. The Company believes that its
equipment and facilities are modern, well-maintained and adequate for its
present needs.
ITEM 3 LEGAL PROCEEDINGS
The Company is, and may in the future be, party to litigation arising in
the course of its business. The Company is not currently a party to any material
pending legal proceedings.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) Market Information
Brady Corporation Class A Nonvoting Common Stock trades on the New York
Stock Exchange under the symbol BRC. There are no established public trading
markets for the Company's Class B Voting Common Stock.
Stock price disclosure required by this Item is incorporated by reference
to Page 50 of the Brady Corporation 1999 Annual Report.
(b) Holders
The number of holders of record of the Company's Class A and Class B Common
Stock as of September 24, 1998, was 411 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,
noncumulative cash dividend of $.033 per share (subject to adjustment in the
event of future stock splits, stock dividends or similar events 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 7/31/98 YEAR ENDED 7/31/99 7/31/00
------------------------------------- ------------------------------------- -------
1ST QTR 2ND QTR 3RD QTR 4TH QTR 1ST QTR 2ND QTR 3RD QTR 4TH QTR 1ST QTR
------- ------- ------- ------- ------- ------- ------- ------- -------
Class A................. $.15 $.15 $.15 $.15 $.16 $.16 $.16 $.16 $.17
Class B................. .12 .15 .15 .15 .13 .16 .16 .16 .14
ITEM 6 SELECTED FINANCIAL DATA
The information required by this Item is incorporated by reference to Pages
28 and 29 of the Brady Corporation 1999 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
30 through 34 of the Brady Corporation 1999 Annual Report.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated by reference to Pages
35 through 50 of the Brady Corporation 1999 Annual Report and the table on page
II-2.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
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BRADY CORPORATION AND SUBSIDIARIES
UNAUDITED QUARTERLY FINANCIAL INFORMATION
QUARTERS
--------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
----- ------ ----- ------ -----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1999
Net Sales................................ $116,802 $112,309 $121,455 $120,296 $470,862
Gross Margin............................. 65,524 62,308 70,954 69,873 268,659
Operating Income......................... 14,529 13,110 20,728 15,405 63,772
Net Income............................... 8,711 7,974 12,937 9,962 39,584
Net Income Per Class A Common Share:
Basic.................................. 0.38 0.35 0.57 0.44 1.74
Diluted................................ 0.38 0.35 0.57 0.43 1.73
1998
Net Sales................................ $115,302 $107,150 $118,784 $113,914 $455,150
Gross Margin............................. 62,717 59,511 67,111 60,916 250,255
Operating Income......................... 13,133 11,201 16,612 4,984 45,930
Net Income............................... 8,210 7,169 10,027 2,630 28,036
Net Income Per Class A Common Share:
Basic.................................. 0.37 0.32 0.44 0.11 1.24
Diluted................................ 0.36 0.31 0.44 0.11 1.23
II-2
13
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
NAME AGE TITLE
---- --- -----
Katherine M. Hudson............... 52 President, CEO and Director
Richard L. Fisk................... 55 Vice President, Direct Marketing Group
David R. Hawke.................... 45 Vice President, Graphics Group
Frank M. Jaehnert................. 42 Vice President & Chief Financial Officer
David W. Schroeder................ 44 Vice President, Identification Solutions & Specialty Tapes
Group
Peter J. Lettenberger............. 62 Secretary and Director
Robert C. Buchanan................ 59 Director
Roger D. Peirce................... 62 Director
Richard A. Bemis.................. 58 Director
Frank W. Harris................... 57 Director
Gary E. Nei....................... 55 Director
Irwin Helford..................... 65 Director
KATHERINE M. HUDSON -- Mrs. Hudson joined the Company in January 1994, as
President, Chief Executive Officer and Director. Before joining Brady
Corporation, she was a Vice President at Eastman Kodak Company and General
Manager of its Professional, Printing and Publishing Imaging Division. Her 24
years at Eastman Kodak Company included positions in finance, communication and
public affairs, information systems and the management of instant photography
and printing. She is a director of Case Corporation and Honeywell, Inc. and
serves on the Alverno College Board of Trustees, the Advisory Board of the
University of Wisconsin School of Business, the Advisory Council for the Indiana
University School of Business, and the Medical College of Wisconsin Board of
Trustees.
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.
DAVID W. HAWKE -- Mr. Hawke joined the Company in 1979. He served as
General Manager of the Industrial Products Division from 1985 to 1991. From 1991
to February 1995, he served as Managing Director -- European Operations. In
March 1995, he was appointed to his present position.
FRANK M. JAEHNERT -- Mr. Jaehnert joined the Company in 1995 as Finance
Director of the Identification Solutions & Specialty Tapes Group. He was
appointed to his present position in November 1996. Before joining the Company,
he held various financial and management positions for Robert Bosch GmbH from
1983 to 1995.
DAVID W. SCHROEDER -- Mr. Schroeder joined the Company in June 1991 as
General Manager of the Industrial Products Division. He was appointed to his
present position in March 1995. Before joining the Company, he served as
President and Chief Executive Officer of Uniroyal Adhesives & Sealants Co., Inc.
from 1988 to May 1991.
PETER J. LETTENBERGER -- Mr. Lettenberger has served as a Director and
Secretary of the Company since January 1977. Mr. Lettenberger was a member of
the Company's audit committee from October 1978 to April 1999. He is a partner
of Quarles & Brady, general counsel to the Company, which firm he joined in
1964. He is also a director of Electronic Tele-Communications, Inc., Waukesha,
Wisconsin.
ROBERT C. BUCHANAN -- Mr. Buchanan has been a Director of the Company since
November 1987. Mr. Buchanan was a member of the Company's audit committee from
June 1988 to April 1999, chairing that committee since June 1990. Mr. Buchanan
is President and Chairman of the Board of the Fox Valley Corporation in
Appleton, Wisconsin, having assumed that position November 1980. He is also a
trustee of The Northwestern Mutual Life Insurance Company, Milwaukee.
III-1
14
ROGER D. PEIRCE -- Mr. Peirce has served as a Director of the Company since
September 1988. Mr. Peirce has been a member of the compensation committee of
the Company since September 1988, and its chairman since November 1996. Mr.
Peirce is a private investor and consultant. He is a director and
secretary/treasurer of The Jor-Mac Company, Inc. in Grafton, Wisconsin. He was
President and CEO of Valuation Research Corporation from April 1995 to May 1996.
From September 1988 to December 1993, he was President of Super Steel Products
Corp. in Milwaukee, Wisconsin. Prior to that he was a managing partner for
Arthur Andersen LLP, independent certified public accountants.
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
the Wisconsin Public Service Corporation, Green Bay, Wisconsin.
FRANK W. HARRIS -- Dr. Harris has been a Director of the Company since
November 1991 and a member of its audit committee since May 1999. Dr. Harris is
a Distinguished 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.
GARY E. NEI -- Mr. Nei has been a Director of the Company since November
1992. Mr. Nei was a member of the Company's audit committee from November 1994
to April 1999. Mr. Nei is Chairman of B&B Publishing, a publishing company in
Walworth, Wisconsin. He is also a director of Uroquest, Inc., Menlo Park,
California.
IRWIN HELFORD -- Mr. Helford has been a Director of the Company since
November 1998 and chairman of its audit committee since April 1999. Mr. Helford
is Chairman of Viking Office Products and Vice Chairman, Office Depot Inc., a
seller of office products in Torrance, California. He is also a director of
Office Depot, Inc., Torrance, California.
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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During fiscal year 1999, Richard A. Bemis, a director of the Company,
purchased 4,000 shares of the Company's Class A Common Stock on October 1, 1998,
and reported such transaction on Form 5 amendment dated September 16, 1999.
III-2
15
ITEM 11 EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or accrued by the
Company during the three fiscal years ended July 31, 1999, to those persons who,
as of the end of fiscal 1999, were the Named Executive Officers.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------------------------- -----------------------------------
OTHER ANNUAL ALL OTHER
FISCAL SALARY BONUS COMPENSATION RESTRICTED STOCK OPTIONS/SAR COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(2) ($)(3) AWARDS($)(4) (# OF SHARES) ($)(5)
- --------------------------- ------ ------ ------ ------------ ---------------- ------------- ------------
K.M. Hudson.............. 1999 441,577 529,892 4,950 -- 34,000 47,589(6)
President & Chief 1998 449,516 190,145 4,829 1,487,500 24,000 107,066(6)
Executive Officer 1997 390,149 305,447 4,648 -- 230,000 40,744(6)
R.L. Fisk................ 1999 253,654 228,289 3,235 -- 12,500 231,903(7)
Vice President, Direct 1998 259,615 82,363 3,560 743,750 8,000 215,180(7)
Marketing Group 1997 228,750 134,333 3,904 -- 110,000 14,199
D.W. Schroeder........... 1999 243,573 219,216 5,908 -- 12,500 13,549
Vice President, 1998 247,889 78,643 4,271 743,750 8,000 13,612
ISST Group 1997 226,385 132,944 5,431 -- 110,000 12,728
D.R. Hawke............... 1999 233,654 210,289 5,191 -- 12,500 13,219
Vice President, 1998 238,836 75,774 2,813 743,750 8,000 13,527
Graphics Group 1997 210,828 123,809 5,583 -- 110,000 144,849(8)
F.M. Jaehnert............ 1999 190,962 171,866 6,835 -- 83,000 13,280
Vice President & 1998 185,309 54,870 5,685 -- 6,000 13,225
Chief Financial Officer 1997 135,659 70,495 -- -- 7,500 17,938(9)
- -------------------------
(1) The decreases in salary in fiscal 1999 are the result of having 26 pay
periods in fiscal 1999 versus 27 pay periods in fiscal 1998.
(2) Reflects bonus earned during the listed fiscal year which was paid during
the next fiscal year.
(3) The amounts shown represent costs to the Company for expenses associated
with the use of a company car.
(4) In August 1997, the Company granted restricted stock awards of 50,000 shares
to Mrs. Hudson and 25,000 shares each to Messrs. Fisk, Schroeder and Hawke.
These awards are valued at $29.7500/share, the closing price for the
Company's Class A Common Stock on the date of issue, in this table. As of
July 31, 1999 and 1998, Mrs. Hudson held 50,000 shares and Messrs. Fisk,
Schroeder and Hawke held 25,000 shares each of restricted stock. Using the
closing price for the Company's Class A Common Stock on July 31, 1999, of
$35.0000/share, Mrs. Hudson's holdings were valued at $1,750,000 and the
holdings of Messrs. Fisk, Schroeder and Hawke were valued at $875,000 each.
The restricted stock awards granted to Mrs. Hudson and Mr. Fisk vest on
August 1, 2002. The restricted stock awards granted to Mr. Schroeder and Mr.
Hawke vest 75% on August 1, 2002, with the remaining 25% vesting on August
1, 2003. The executives have the right to receive any cash dividends payable
on these shares.
(5) All other compensation for fiscal 1999 for Mrs. Hudson, and Messrs. Fisk,
Schroeder, Hawke and Jaehnert, respectively, includes: (i) matching
contributions to the Company's Profit Sharing and Employee Thrift Plan for
each named executive officer of $12,800, $12,262, $12,800, $12,323 and
$12,800 respectively and (ii) the cost of group term life insurance for each
named executive officer of $3,434, $2,642, $749, $896 and $480,
respectively.
All other compensation for fiscal 1998 for Mrs. Hudson, and Messrs. Fisk,
Schroeder, Hawke and Jaehnert, respectively, includes: (i) matching
contributions to the Company's Profit Sharing and Employee Thrift Plan for
each named executive officer of $12,800 each and (ii) the cost of group term
life insurance for each named executive officer of $4,669, $2,380, $812,
$727 and $425, respectively.
III-3
16
All other compensation for fiscal 1997 for Mrs. Hudson, and Messrs. Fisk,
Schroeder, Hawke and Jaehnert, respectively, includes: (i) matching
contributions to the Company's Profit Sharing and Employee Thrift Plan for
each named executive officer of $12,000, $12,000, $12,000, $12,000 and
$11,946, respectively and (ii) the cost of group term life insurance for
each named executive officer of $2,674, $2,199, $728, $647 and $324,
respectively.
(6) Fiscal 1999 includes $31,355 accrued, but not paid, for the current year's
portion of a Supplemental Executive Retirement Plan (SERP). Fiscal 1998
includes club dues and estate planning fees of $61,963 and $27,634 accrued,
but not paid, for the current year's portion of the SERP. Fiscal 1997
includes $26,070 accrued, but not paid, for that year's portion of the SERP.
(7) Fiscal 1999 includes $217,000 accrued, but not paid, for the current year's
portion of a Supplemental Executive Retirement Plan (SERP). Fiscal 1998
includes $200,000 accrued, but not paid, for the current year's portion of
the SERP.
(8) Fiscal 1997 includes $132,202 expatriation expenses related to Mr. Hawke's
Belgium assignment.
(9) Fiscal 1997 includes relocation expenses of $5,669.
STOCK OPTIONS
The following tables summarize option grants and exercises during fiscal
1999 to or by the executive officers named in the Summary Compensation Table
above, and the value of unexercised options held by such persons at July 31,
1999. Stock Appreciation Rights are not available under any of the Company's
plans.
OPTION GRANTS IN FISCAL 1999
INDIVIDUAL GRANTS
% OF TOTAL
OPTIONS
GRANTED TO
OPTIONS EMPLOYEES EXERCISE
GRANTED (#) IN FISCAL PRICE ($/SHARE)
NAME (1) 1999 (2) EXPIRATION DATE
---- ----------- ---------- --------------- ---------------
K.M. Hudson.............................. 34,000 9.9% 19.1875 October 9, 2008
R.L. Fisk................................ 12,500 3.6% 19.1875 October 9, 2008
D.W. Schroeder........................... 12,500 3.6% 19.1875 October 9, 2008
D.R. Hawke............................... 12,500 3.6% 19.1875 October 9, 2008
F.M. Jaehnert............................ 75,000 21.9% 20.3738 August 3, 2008
8,000 2.3% 19.1875 October 9, 2008
POTENTIAL REALIZABLE VALUE AT ASSUMED RATES
OF STOCK PRICE APPRECIATION(3)
-----------------------------------------------
0% 5% 10%
NAME $19.1875($) $31.2500($)(6) $49.7500($)(6)
---- ----------- -------------- --------------
K.M. Hudson........................................... 0 410,125 1,039,125
R.L. Fisk............................................. 0 150,781 382,031
D.W. Schroeder........................................ 0 150,781 382,031
D.R. Hawke............................................ 0 150,781 382,031
F.M. Jaehnert......................................... 0 1,057,531 2,677,406
All Stockholders' Gains (increase in market value of Brady
corporation Common Stock at assumed rates of stock price
appreciation)(4)(6)................................................ $250,072,066 $633,602,282
All Optionees' Gains (as a percent of all shareholders'
gains)(5)(6)....................................................... 1.68% 1.68%
- -------------------------
(1) The options granted October 9, 1998, become exercisable as follows: 33 1/3%
of the shares on October 9, 1999; 33 1/3% of the shares on October 9, 2000;
and 33 1/3% of the shares on October 9, 2001. These options have a term of
ten years.
III-4
17
The options granted to Mr. Jaehnert on August 3, 1998, become
exercisable August 3, 2003, and 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 the NASDAQ on the
date of the grant.
(3) Represents total potential appreciation of approximately 0%, 63% and
159% for assumed annual rates of appreciation of 0%, 5% and 10%,
respectively, compounded annually for the ten year option term.
(4) Calculated from the $20.3738 exercise price applicable to the options
granted on August 3, 1998 and the $19.1875 exercise price applicable to
the options granted on October 9, 1998 based on the 20,731,363 shares
of Class A Common Stock outstanding on October 9, 1998.
(5) Represents potential realizable value for all options granted in fiscal
1999 compared to the increase in market value of Brady Corporation
Class A Common Stock at assumed rates of stock price appreciation.
(6) The Company disavows the ability of any valuation model to predict or
estimate the Company's future stock price or to place a reasonably
accurate present value on these options because any model depends on
assumptions about the stock's future price movement that the Company is
unable to predict.
AGGREGATED OPTION EXERCISES IN FISCAL 1999
AND VALUE OF OPTIONS AT END OF FISCAL 1999
NUMBER OF UNEXERCISED
OPTIONS AT
SHARES JULY 31, 1999
ACQUIRED ON VALUE ----------------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#)
---- ----------- -------- ----------- -------------
K.M. Hudson....................................... 0 0 169,000 260,000
R.L. Fisk......................................... 10,500 157,156 60,334 121,166
D.W. Schroeder.................................... 0 0 43,834 121,166
D.R. Hawke........................................ 8,000 158,000 40,834 121,166
F.M. Jaehnert..................................... 0 0 10,000 89,500
VALUE OF UNEXERCISED
IN-THE-MONEY OPTIONS
AT JULY 31, 1999(1)
----------------------------
EXERCISABLE UNEXERCISABLE
NAME ($) ($)
---- ----------- -------------
K.M. Hudson................................................. 2,756,750 2,942,500
R.L. Fisk................................................... 891,359 1,370,109
D.W. Schroeder.............................................. 713,952 1,370,109
D.R. Hawke.................................................. 655,078 1,370,109
F.M. Jaehnert............................................... 97,687 1,270,684
- -------------------------
(1) Represents the closing price for the Company's Class A Common Stock on July
31, 1999, of $35.0000 less the exercise price for all outstanding
exercisable and unexercisable options for which the exercise price is less
than such closing price.
III-5
18
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,
1994, in each of Brady Corporation Class A Common Stock, the Standard & Poor's
(S&P) 500 Index and the Russell 2000 Index. Prior year graphs compared Brady's
performance to the S&P 500 and the National Association of Securities Dealers'
Automated Quotation System (NASDAQ) United States Index. In May 1999, Brady
listed on the New York Stock Exchange making the comparison to a NASDAQ index
obsolete.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL
RETURN BRADY CORPORATION VERSUS PUBLISHED INDICES
(S&P 500 AND RUSSELL 2000)
FISCAL YEAR ENDING JULY 31,
BRADY S&P 500 RUSSELL 2000 NASDAQ-US
----- ------- ------------ ---------
F94 100.00 100.00 100.00 100.00
F95 152.00 123.00 123.00 140.00
F96 142.00 140.00 129.00 153.00
F97 195.00 208.00 170.00 226.00
F98 141.00 245.00 172.00 266.00
F99 236.00 290.00 182.00 380.00
- --------------------------------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
- --------------------------------------------------------------------------------------------------------
Brady $100 $152 $142 $195 $141 $236
- --------------------------------------------------------------------------------------------------------
S&P 500 $100 $123 $140 $208 $245 $290
- --------------------------------------------------------------------------------------------------------
RUSSELL 2000 $100 $123 $129 $170 $172 $182
- --------------------------------------------------------------------------------------------------------
NASDAQ -- US $100 $140 $153 $226 $266 $380
- --------------------------------------------------------------------------------------------------------
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 $1,250 plus expenses for each meeting of the Board or
any committee thereof which they attend.
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS
In May 1997, the Board approved Change in Control Agreements for certain of
its executive officers including Mrs. Hudson, Messrs. Fisk, Schroeder, Hawke and
Jaehnert. The agreements call for payment of an amount equal to two times the
annual salary for Mrs. Hudson and Messrs. Fisk, Schroeder and Hawke, and payment
of one time his annual salary for Mr. Jaehnert in the event of termination or
resignation upon a change of control. The agreements also call for reimbursement
of any excise taxes imposed and up to $25,000 of attorney fees to enforce the
executive's rights under the agreement. Payments under the agreements will be
III-6
19
spread over two years for Mrs. Hudson and Messrs. Fisk, Schroeder and Hawke, and
over one year for Mr. Jaehnert. In August 1998, the Board amended the Change in
Control Agreement for Mr. Jaehnert to call for payment of an amount equal to two
times his annual salary in the event of termination or resignation upon a change
in control with payments spread over two years.
In May 1997, the Company created a Supplemental Executive Retirement Plan
(SERP) for Mr. Fisk. The Plan calls for the Company to credit a deferred
compensation account with $200,000 on August 1 of each year beginning August 1,
1997, to and including August 1, 2001, provided Mr. Fisk 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 August 1 of each year, but not less than
6% nor more than 10% per annum.
The Company is required to pay Mr. Fisk 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, and the nine succeeding
payments, will equal one-tenth of the balance in the account. Succeeding
payments 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 such ten year period.
In fiscal 1994 the Company created a Supplemental Executive Retirement Plan
(SERP) for Mrs. Hudson. The stated amount of the Plan at January 1, 1999, was
$500,000. The Company credited a deferred compensation account with the net
present value of the stated amount in January 1994. The account is credited
annually with the current year's increase in the net present value calculation.
After January 1, 1999, interest accrues 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 30 days.
RESTRICTED STOCK
In August 1997, the Company granted restricted stock awards to certain key
executives. Mrs. Hudson was awarded 50,000 shares of authorized, but unissued,
Class A Common Stock and Messrs. Fisk, Schroeder and Hawke were awarded 25,000
shares each of authorized but unissued Class A Common Stock. The restricted
stock awards granted Mrs. Hudson and Mr. Fisk vest on August 1, 2002. The
restricted stock awards granted Mr. Schroeder and Mr. Hawke vest 75% on August
1, 2002, with the remaining 25% vesting on August 1, 2003. The executives have
the right to receive any cash dividends payable on these shares.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1999, the Board's Compensation Committee was composed of
Messrs. Bemis and Peirce. Mr. Lettenberger serves as a nonvoting advisor to the
Committee. 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
Substantially all Brady employees in the United States and certain
expatriate employees working for its international subsidiaries are eligible to
participate in the Company's Money Purchase 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
III-7
20
earnings of each person covered by the BradyGold Plan. In addition, participants
may elect to have their annual pay reduced by up to 4% and 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 up to another 4% of their eligible earnings contributed to the BradyGold
Plan (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 retirement, 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
During fiscal 1998, the Company adopted a new deferred compensation plan
whereby 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 shares of the
Company's Class A Common Stock. Participants in the old deferred compensation
plan were allowed to convert their balances in the old plan to this new plan.
The conversion to the new plan was funded by the issuance of 372,728 shares of
Class A Common Stock to a Rabbi Trust (the "Trust") in November 1997. All
deferrals into the new plan result in purchases of existing Class A Common Stock
by the Trust. No deferrals are allowed into the old plan.
Upon the retirement, disability, or death of participant, the Company is
required under the new plan to pay, each year for a period of ten years, a
portion of the shares held in the participant's name by the Trust. The first
payment must be one-tenth of the number of shares held; the second one-ninth;
and so on, with the number of shares held in the Trust reduced by each payment.
If the participant's employment ends for reasons other than retirement,
disability or death, the shares held by the Trust in the participant's name will
be distributed over a period of ten years. At the request of the participant,
the Company may make distributions in larger installments or in a lump sum or
other basis.
In the old deferred compensation plan, directors, executive officers,
corporate staff officers and certain key management employees of the Company
were 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. No new deferrals are allowed into this old deferred
compensation plan. 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. 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.
All current directors and executives converted their balances to the new
deferred compensation plan. Certain retired participants elected not to transfer
their balances into the new plan. They were allowed to remain in the old
deferred compensation plan until the end of fiscal 2002. At that point the old
plan will terminate and participant's balances will earn simple interest at a
rate equal to the yield on a 30-year U.S. Treasury Bond.
III-8
21
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 shareholder value enhancement plan cash bonuses and
(iii) long term incentive compensation in the form of stock options and/or
restricted stock. 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
1999, 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 Shareholder Value Enhancement Plan
The shareholder value enhancement 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 90%
objective. It stresses maximization of Company profitability and increasing
shareholder value.
Stock Options
In May 1997, the Company approved the Brady Corporation 1997 Omnibus
Incentive Stock Plan and the Brady Corporation 1997 Nonqualified Stock Option
Plan for Non-Employee Directors (the "Option Plans") under which 2,000,000
shares and 125,000 shares, respectively, of Class A Common Stock are available
for grant. In 1989 the Board approved the Brady Corporation 1989 Non-Qualified
Stock Option Plan (the "Option Plan") under which 1,500,000 shares of Class A
Common Stock were available for grant. The Option Plans assist directors,
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 Plans are at market price on the date of the grant.
III-9
22
Compliance with 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 nondeductible compensation in
excess of these limits. The Compensation Committee will continue to review these
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 $441,577 in base salary in fiscal 1999, a decrease of
2% from the prior year's base salary (the result of 26 pay periods in fiscal
1999 versus 27 in fiscal 1998). She was paid a bonus attributable to fiscal 1999
of $529,892, a increase of 179%, or $339,747, from the prior year's bonus. The
bonus was determined in accordance with the Company's objective Bonus Plan,
discussed above. Mrs. Hudson's compensation reflects:
(i) an increase of 20%, or $6,415,000, in profits (after removing the
effects of the nonrecurring items) and 3.5% in sales over similar
amounts from the prior year; an increase of 71%, from $20.50 to
$35.00, in the Company's stock price
(ii) the successful acquisitions of VEB Sistemas de Etiquetas Ltda.,
Barcodes West Inc., Visi Sign Pty. Ltd., Holman Groupe S.A. and the
graphics division of SOFT S.A. this year and the integration of last
year's acquisitions Techniques Avancees and GrafTek
(iii) continued improvement in asset utilization (a 2% reduction in
inventory despite the 4% increase in sales)
(iv) continued efforts to focus the Company's resources on sustainable
value-enhancing long-term growth
(v) continued improvement in intercompany teamwork.
During fiscal 1999, Mrs. Hudson was awarded options to purchase 34,000
shares of Class A Common Stock.
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.
Roger D. Peirce, Chairman
Richard A. Bemis
III-10
23
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, 1999.
AMOUNT OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP OWNERSHIP
-------------- ------------------- ---------- ----------
Class B Common Stock...................... William H. Brady, Jr.(1) 1,574,866 89%
Marital Trust
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
- -------------------------
(1) The trustees of both trusts are Richard A. Bemis, Robert C. Buchanan, Peter
J. Lettenberger, Roger D. Peirce and Gary E. Nei, each of whom shares voting
and dispositive power. The vested beneficiary was Irene B. Brady, who died
March 26, 1998. The contingent remainder beneficiaries are William H. Brady,
III and Elizabeth B. Lurie.
III-11
24
(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, 1999.
Except as otherwise indicated, all shares are owned directly.
NAME OF BENEFICIAL AMOUNT OF
OWNER & NATURE OF BENEFICIAL PERCENT OF
TITLE OF CLASS BENEFICIAL OWNERSHIP OWNERSHIP OWNERSHIP
-------------- -------------------- ---------- ----------
Class A Common Stock................. Peter J. Lettenberger(1)(2)(3) 2,527,779 12.1%
Richard A. Bemis(1)(4) 1,782,872 8.5%
Gary E. Nei(1)(5) 1,778,372 8.5%
Roger D. Peirce(1)(6) 1,776,872 8.5%
Robert C. Buchanan(1)(7) 1,775,972 8.5%
Katherine M. Hudson(8) 255,684 1.2%
Frank W. Harris 4,867 * %
Irwin Helford 833 * %
All Officers and Directors as a Group
(15 persons)(9) 3,186,789 15.3%
Class B Common Stock................. Peter J. Lettenberger(1) 1,769,314 100%
Richard A. Bemis(1) 1,769,314 100%
Gary E. Nei(1) 1,769,314 100%
Roger D. Peirce(1) 1,769,314 100%
Robert C. Buchanan(1) 1,769,314 100%
All Officers and Directors as a Group 1,769,314 100%
6% Cumulative Preferred Stock........ Peter J. Lettenberger(1)(2) 2,751 69.1%
Richard A. Bemis(1) 1,920 48.2%
Gary E. Nei(1) 1,920 48.2%
Roger D. Peirce(1) 1,920 48.2%
Robert C. Buchanan(1) 1,920 48.2%
All Officers and Directors as a Group 2,751 69.1%
10% Cumulative 1979 Series Preferred
Stock.............................. Peter J. Lettenberger(2) 5,529 25.2%
All Officers and Directors as a Group 5,529 25.2%
6% Cumulative 1972 Series Preferred
Stock.............................. Peter J. Lettenberger(2) 2,600 100%
All Officers and Directors 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-Q-TIP Trust") (collectively, the "Trusts"). The
Marital Trust owns 1,771,538 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 194,448 shares of Class B Common Stock and
211 shares of 6% Cumulative Preferred Stock. The Trustees of both Trusts are
Richard A. Bemis, Robert C. Buchanan, Peter J. Lettenberger, Gary E. Nei and
Roger D. Peirce, each of whom shares voting and dispositive power.
(2) Peter J. Lettenberger is a director of the W.H. Brady Foundation, Inc. (the
"Foundation") which owns 5,529 shares of the 1979 Series 10% Cumulative
Preferred Stock, 763 shares of the 6% Cumulative Preferred Stock and 2,600
shares of the 6% Cumulative Preferred Stock, 1972 Series. Mr. Lettenberger
is also a trustee of the Irene B. Brady Revocable Trust of 1986 (the "1986
Trust"), which owns 748,718 shares of Class A Common Stock and 68 shares of
6% Cumulative Preferred Stock. He disclaims beneficial ownership of shares
held by the Foundation and the 1986 Trust.
III-12
25
(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 5,189 shares of Class A Common Stock and holds vested options to
acquire an additional 2,334 shares of Class A Common Stock.
(4) In addition to shares beneficially owned as a trustee of the Trusts, Mr.
Bemis owns 9,000 shares of Class A Common Stock directly and holds vested
options to acquire an additional 2,334 shares of Class A Common Stock.
(5) In addition to shares beneficially owned as a trustee of the Trusts, Mr. Nei
owns 4,500 shares of Class A Common Stock directly and holds vested options
to acquire an additional 2,334 shares of Class A Common Stock.
(6) In addition to shares beneficially owned as a trustee of the Trusts, Mr.
Peirce owns 1,500 shares of Class A Common Stock directly, 1,500 shares
through his Keogh plan and holds vested options to acquire an additional
2,334 shares of Class A Common Stock.
(7) In addition to shares beneficially owned as a trustee of the Trusts, Mr.
Buchanan owns 600 shares of Class A Common Stock directly, 1,500 additional
shares through his Keogh plan and holds vested options to acquire an
additional 2,334 shares of Class A Common Stock.
(8) Mrs. Hudson owns 57,351 shares of Class A Common Stock directly and holds
vested options to acquire an additional 198,333 shares of Class A Common
Stock.
(9) The amount shown for all officers and directors as a group (15 persons)
includes options to acquire a total of 467,255 shares of Class A Common
Stock which are currently exercisable or will be exercisable within 60 days
of September 30, 1999. It does not include other options for Class A Common
Stock which have been granted at later dates.
(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
None.
III-13
26
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULE, 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 35
through 50 of the Company's 1999 Annual Report is incorporated herein by
reference.
2) Consolidated Financial Statement Schedule --
Schedule II Valuation and Qualifying Accounts
Independent Auditors' Report on Financial Statement Schedule
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 -- See Exhibit Index at page IV-2 of this Form 10-K.
(b) Reports on Form 8-K.
None
IV-1
27
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 Restated Articles of Incorporation of Brady Corporation(1)
3.2 By-laws of Brady Corporation, as amended(2)
10.2 Brady Corporation BradyGold Plan, as amended(2)
10.3 Executive Additional Compensation Plan, as amended(2)
10.4 Form of Executive's Deferred Compensation Agreement, as
amended(2)
10.5 Forms of Director's Deferred Compensation Agreement, as
amended(2)
10.6 Brady Corporation 1989 Non-Qualified Stock Option Plan(4)
10.7 Shareholder Value Enhancement (SVE) Plan(6)
10.9 Brady Corporation Automatic Dividend Reinvestment Plan(4)
10.10 Supplemental Executive Retirement Plan between Brady
Corporation and Katherine M. Hudson(5)
10.12 Brady Corporation 1997 Omnibus Incentive Stock Plan(7)
10.13 Brady Corporation 1997 Nonqualified Stock Option Plan for
Non-Employee Directors(7)
10.14 Change of Control Agreement dated May 13, 1997 between Brady
Corporation and Katherine M. Hudson(7)
10.15 Change of Control Agreement dated May 13, 1997 between Brady
Corporation and David W. Schroeder(7)
10.16 Change of Control Agreement dated May 13, 1997 between Brady
Corporation and Richard L. Fisk(7)
10.17 Change of Control Agreement dated May 13, 1997 between Brady
Corporation and David R. Hawke(7)
10.19 Supplemental Executive Retirement Plan dated May 14, 1997
between Brady Corporation and Richard L. Fisk(7)
10.20 Restricted Stock Agreement dated August 1, 1997 between
Brady Corporation and Katherine M. Hudson(8)
10.21 Restricted Stock Agreement dated August 1, 1997 between
Brady Corporation and Richard L. Fisk(8)
10.22 Restricted Stock Agreement dated August 1, 1997 between
Brady Corporation and David W. Schroeder(8)
10.23 Restricted Stock Agreement dated August 1, 1997 between
Brady Corporation and David R. Hawke(8)
10.24 Amendment to Change of Control Agreement dated August 1,
1998 between Brady Corporation and Frank M. Jaehnert
13.1 Annual Report to Shareholders for year ended July 31, 1999
18.1 Letter regarding change in accounting method(3)
21.1 Subsidiaries of Brady Corporation
23.1 Consent of Deloitte & Touche LLP, Independent Auditor
27.1 Financial Data Schedule
- -------------------------
(1) Incorporated by reference to Registrant's Registration Statement No.
333-04155 on Form S-3
(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 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
(5) Incorporated by reference to Registrant's Annual Report on Form 10-K for the
fiscal year ended July 31, 1994
(6) Incorporated by reference to Registrant's Annual Report on Form 10-K for the
fiscal year ended July 31, 1995
(7) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended April 30, 1997
(8) Incorporated by reference to Registrant's Annual Report on Form 10-K for the
fiscal year ended July 31, 1997
IV-2
28
BRADY CORPORATION AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED JULY 31,
---------------------------
1999 1998 1997
---- ---- ----
(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............................. $2,011 $ 2,241 $1,992
Additions -- Charged to expense............................. 966 970 663
Due to acquired businesses............................. 97 64 87
Deductions -- Bad debts written off, net of recoveries...... (735) (1,264) (501)
------ ------- ------
Balances at end of period................................... $2,339 $ 2,011 $2,241
====== ======= ======
IV-3
29
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Brady Corporation:
We have audited the consolidated financial statements of Brady Corporation
and subsidiaries as of July 31, 1999 and 1998 and for each of the three years in
the period ended July 31, 1999, and have issued our report thereon dated
September 23, 1999; such consolidated financial statements and report are
included in your 1999 Annual Report to Stockholders and are incorporated herein
by reference. Our audits also included the consolidated financial statement
schedule of Brady Corporation and subsidiaries, listed in Item 14. The
consolidated financial statement schedule is 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 schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
Milwaukee, Wisconsin
September 23, 1999
IV-4
30
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 twenty-second day
of October, 1999.
BRADY CORPORATION
By /s/ F. M. JAEHNERT
------------------------------------
F. M. Jaehnert
Vice President & Chief Financial
Officer
(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
- ----------------------------------------------------- (Principal Executive
K. M. Hudson Officer) October 22, 1999
/s/ P. J. LETTENBERGER Director
- -----------------------------------------------------
P. J. Lettenberger October 22, 1999
/s/ R. A. BEMIS Director
- -----------------------------------------------------
R. A. Bemis October 22, 1999
Director
- -----------------------------------------------------
F. W. Harris
/s/ R. C. BUCHANAN Director
- -----------------------------------------------------
R. C. Buchanan October 22, 1999
/s/ R. D. PEIRCE Director
- -----------------------------------------------------
R. D. Peirce October 22, 1999
/s/ G. E. NEI Director
- -----------------------------------------------------
G. E. Nei October 22, 1999
/s/ I. HELFORD Director
- -----------------------------------------------------
I. Helford October 22, 1999
IV-5