W. H. BRADY CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 31, 1994 AND 1993
(Dollars in Thousands)
ASSETS 1994 1993
CURRENT ASSETS:
Cash and cash equivalents $ 66,107 $ 42,366
(Note 1)
Accounts receivable, less allowance for losses
($1,565 and $1,247, respectively) 32,308 30,522
Inventories (Note 1):
Finished products 16,717 13,466
Work-in-process 2,534 2,698
Raw materials and supplies 4,486 6,569
Total inventories 23,737 22,733
Prepaid expenses and other current assets 9,611 10,025
(Notes 1, 3 and 4)
Total current assets 131,763 105,646
OTHER ASSETS (Note 4) 6,403 6,893
PROPERTY, PLANT AND EQUIPMENT (Notes 1 and 5):
Cost:
Land 4,689 4,664
Buildings and improvements 38,431 37,473
Machinery and equipment 72,576 68,802
Construction in progress 939 3,807
116,635 114,746
Less accumulated depreciation 52,292 47,384
Net property, plant and equipment 64,343 67,362
TOTAL $202,509 $179,901
See notes to consolidated financial statements.
W. H. BRADY CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JULY 31, 1994, 1993 AND 1992
(Dollars in Thousands)
1994 1993 1992
OPERATING ACTIVITIES:
Net Income $ 18,540 $ 16,856 $ 5,055
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 9,325 9,848 8,450
Amortization 110 325 294
Write down of machinery and equipment 3,875
Cumulative effect of change in method of
accounting for income taxes (661)
Cumulative effect of change in method of
accounting for postretirement benefits 3,995
Gain on sale of businesses (1,963)
Loss on sale of equipment 194 51 34
Provision for losses on accounts receivable 725 758 750
Changes in operating assets and liabilities
(net of effects of business disposals in 1993):
Accounts receivable (2,169) (2,917) (4,532)
Inventory (928) (3,583) (1,826)
Prepaid expenses and other assets 1,305 1,981 (2,433)
Accounts payable and accrued liabilities 3,325 (890) 5,925
Income taxes 1,852 2,139 (77)
Deferred income taxes (413) (608) (1,476)
Other liabilities 1,202 (415) 1,062
Net cash provided by operating activities 33,068 21,582 18,435
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (6,466) (12,280) (24,074)
Proceeds from sale of property, plant and
equipment 458 570 475
Proceeds from sale of businesses 10,327
Proceeds from sale of temporary investments 6,113
Net cash used in investing activities (6,008) (1,383) (17,486)
FINANCING ACTIVITIES:
Payment of dividends (4,999) (4,400) (4,101)
Proceeds from issuance of common stock 1,063 646 355
Proceeds from long-term borrowings 217 139 1,610
Principal payments on long-term debt (495) (711) (2,453)
Net cash used in financing activities (4,214) (4,326) (4,589)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 895 (2,026) 2,281
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ 23,741 $ 13,847 $ (1,359)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 42,366 28,519 29,878
CASH AND CASH EQUIVALENTS, END OF YEAR $ 66,107 $ 42,366 $ 28,519
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Cash paid during the year for:
Interest $ 237 $ 436 $ 309
Income taxes, net of refunds 10,601 9,110 9,839
See notes to consolidated financial statements.
W. H. BRADY CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JULY 31, 1994, 1993, AND 1992
(Dollars in Thousands, Except Per Share Amounts)
1994 1993 1992
NET SALES $255,841 $242,970 $235,965
OPERATING EXPENSES:
Cost of products sold 118,116 114,301 110,130
Research and development 10,318 12,132 10,001
Selling, general and administrative 97,932 92,449 93,931
Nonrecurring charge (credit)
(Note 2) (1,236) 6,562
Total operating expenses 226,366 217,646 220,624
OPERATING INCOME 29,475 25,324 15,341
OTHER INCOME AND (EXPENSE):
Investment and other income - net 837 559 239
Interest expense (410) (54) (219)
Net other income 427 505 20
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES 29,902 25,829 15,361
INCOME TAXES (Notes 1 and 4) 11,362 8,973 6,972
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES 18,540 16,856 8,389
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES FOR:
Postretirement benefits (net of income taxes of $2,663)
(Note 3) (3,995)
Income taxes (Notes 1 and 4) 661
NET INCOME $18,540 $16,856 $5,055
"NET INCOME PER COMMON SHARE (Notes 1, 6 and 8):"
Class A nonvoting:
Income before cumulative effect
of changes in accounting
principles (includes $.10
preferential dividend) $ 2.55 $ 2.33 $1.16
Cumulative effect of changes in accounting principles for:
Postretirement benefits (Note 3) (0.56)
Income taxes (Note 4) 0.09
Net income $ 2.55 $ 2.33 $0.69
Class B voting - net income $ 2.45 $ 2.23 $0.59
See notes to consolidated financial statements.
W. H. BRADY CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
YEARS ENDED JULY 31, 1994, 1993 AND 1992
(Dollars In Thousands, Except Per Share Amounts)
Additional Earnings Cumulative
Preferred Common Paid-in Retained in the Translation
Stock Stock Capital Business Adjustments
Balances at
August 1, 1991 $2,855 $72 $4,385 $105,320 $2,628
Net income 5,055
Net currency
translation adjustment 3,106
Issuance of 15,100 shares of Class A
common stock under stock
option plan 355
Tax benefit from exercise of
stock options 96
Cash dividends on preferred stock:
1979 series - $10 a share 220
6% and 1972 series - $6 a share (39)
Cash dividends on common stock:
Class A - $.56 a share (3,028)
Class B - $.46 a share (814)
Balances at
July 31, 1992 2,855 72 4,836 106,274 5,734
Net income 16,856
Net currency translation adjustment (4,894)
Issuance of 26,000 shares of Class A
common stock under stock
option plan 646
Tax benefit from exercise of
stock options 89
Cash dividends on preferred stock:
1979 series - $10 a share (220)
6% and 1972 series - $6 a share (39)
Cash dividends on common stock:
Class A - $.60 a share (3,256)
Class B - $.50 a share (885)
Balances at
July 31, 1993 2,855 72 5,571 118,730 840
Net income 18,540
Net currency translation adjustment 2,323
Issuance of 39,650 shares of Class A common stock
under stock option plan 1,063
Tax benefit from exercise of
stock options 134
Cash dividends on preferred stock:
1979 series - $10 a share (220)
6% and 1972 series - $6 a share (39)
Cash dividends on common stock:
Class A - $.68 a share (3,714)
Class B - $.58 a share (1,026)
Balances at
July 31, 1994 $2,855 $72 $6,768 $132,271 $3,163
See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' INVESTMENT 1994 1993
CURRENT LIABILITIES:
Accounts payable $ 9,678 $ 8,577
Wages and amounts withheld from employees 10,479 8,374
Taxes, other than income taxes 1,962 1,676
Accrued income taxes 2,999 2,392
Other current liabilities (Note 3) 6,217 6,206
Current maturities on long-term debt (Note 5) 405 478
Total current liabilities 31,740 27,703
LONG-TERM DEBT, less current maturities (Note 5) 1,855 1,978
OTHER LIABILITIES (Note 3) 23,785 22,152
Total liabilities 57,380 51,833
STOCKHOLDERS' INVESTMENT (Note 6):
Preferred stock (aggregate liquidation preference of
$3,026 at July 31, 1994) 2,855 2,855
Common stock:
Class A Nonvoting - Issued and outstanding 5,476,812
and 5,437,162 shares, respectively, (aggregate liquidation
preference of $27,384 at July 31, 1994) 54 54
Class B Voting - Issued and outstanding
1,769,314 shares 18 18
Additional paid-in capital 6,768 5,571
Earnings retained in the business 132,271 118,730
Cumulative translation adjustments 3,163 840
Total stockholders' investment 145,129 128,068
TOTAL $202,509 $179,901
4. INCOME TAXES
Deferred income taxes result from timing differences in the recognition of
revenues and expenses for financial statement and income tax purposes. These
differences relate principally to depreciation and certain expenses not
deductible for tax reporting until paid.
Pre-tax income consists of the following:
Year Ended July 31,
1994 1993 1992
(Dollars in thousands)
United States $21,565 $22,220 $12,298
Foreign 8,337 3,609 3,063
Total $29,902 $25,829 $15,361
4. INCOME TAXES
The approximate tax effects of temporary differences are as follows:
July 31, 1994
Assets Liabilities Total
(Dollars in thousands)
Inventories $ 1,659 $ 1,659
Prepaid catalog costs $ (612)
Employee benefits (505) (505)
Tax loss carryforwards 397 397
Allowance for doubtful accounts 324 324
Other, net 644 644
Current 3,024 (1,117) 1,907
Excess of tax over book depreciation (4,517) (4,517)
Deferred compensation 6,001 6,001
Postretirement benefits 3,129 3,129
Tax loss carryforwards 1,550 1,550
Less valuation allowance (1,550) (1,550)
Other, net 259 259
Noncurrent 9,389 (4,517) 4,872
Total $12,413 $(5,634) $ 6,779
"July 31, 1993"
Assets Liabilities Total
(Dollars in thousands)
Inventories $ 1,021 $ 1,021
Prepaid catalog costs $ (684) (684)
Employee benefits (659) (659)
Tax loss carryforwards 591 591
Less valuation allowance (364) (364)
Other, net 1,085 1,085
Current 2,333 (1,343) 990
Excess of tax over book depreciation (3,949) (3,949)
Deferred compensation 5,881 5,881
Postretirement benefits 2,957 2,957
Tax loss carryforwards 1,821 1,821
Less valuation allowance (1,457) (1,457)
Other, net 123 123
Noncurrent 9,325 (3,949) 5,376
Total $11,658 $(5,292) $ 6,366
4. INCOME TAXES
At July 31, 1994 and 1993, $1,907,000 and $990,000, respectively, of net
deferred tax assets were included in prepaid expenses and other current assets.
At July 31, 1994 and 1993, $4,872,000 and $5,376,000 respectively, of net
deferred tax assets were included in other assets.
A reconciliation of the tax computed by applying the statutory U.S. Federal
income tax rate to income before taxes to the total tax provision is as follows:
Year Ended July 31,
1994 1993 1992
(Dollars in thousands)
Tax at statutory rate $10,466 $8,782 $5,223
State income taxes, net of Federal tax
benefit 1,271 841 726
International losses with no related tax
benefits 175 351 478
International rate differential (226) 126 110
Rate variances arising from foreign
subsidiary distributions 174 157 (122)
Provision for future settlements (730) 730
Other, net (498) (554) (173)
Total income tax provision $11,362 $8,973 $6,972
Effective tax rate 38.0 % 34.7 % 45.4 %
The Company's policy is to remit earnings from foreign subsidiaries only to the
extent any resultant foreign income taxes are creditable in the United States.
Accordingly, the Company does not currently provide for the additional United
States and foreign income taxes which would become payable upon remission of
undistributed earnings of foreign subsidiaries.
The cumulative undistributed earnings of such companies at July 31, 1994
amounted to approximately $8,400,000. If all such undistributed earnings were
remitted, an additional provision for foreign income taxes of approximately
$200,000 would be required.
4. INCOME TAXES
Effective August 1, 1991, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109). The Company
elected to reflect the effect of this accounting principle change as a
cumulative effect adjustment as of August 1, 1991.
Income taxes consist of the following:
Year Ended July 31,
1994 1993 1992
(Dollars in thousands)
Currently payable:
Federal $ 6,987 $6,612 $ 5,800
Foreign 2,755 1,869 1,279
State 2,033 1,100 1,369
11,775 9,581 8,448
Deferred (credit):
Federal (448) (376) (1,557)
Foreign 112 (165) 350
State (77) (67) (269)
(413) (608) (1,476)
Total $11,362 $8,973 $ 6,972
5. LONG-TERM DEBT
Long-term debt consists of the following:
July 31,
1994 1993
(Dollars in thousands)
6.25% Industrial Development Revenue Bonds payable
on December 1, 2001 $1,000 $1,000
6.375% Industrial Development Revenue Bonds
payable in quarterly installments of $33,000
to January 1, 1995" 100 233
6.75% Industrial Development Revenue Bonds payable
in annual installments ranging from $120,000 in
1995 to $140,000 in 1997 385 495
Other 775 728
2,260 2,456
Less current maturities 405 478
$1,855 $1,978
7. DOMESTIC AND FOREIGN OPERATIONS
Data with respect to operations located outside the United States which have
translated into U.S. dollars is as follows:
Year Ended July 31,
1994 1993 1992
(Dollars in thousands)
Current assets $ 41,702 $38,497 $36,576
Other assets 4,833 3,949 2,928
Property, plant and equipment 8,474 8,070 9,207
Total assets $ 55,009 $50,516 $48,711
Current liabilities $ 38,645 $34,081 $33,776
Long-term debt 590 492 796
Other liabilities 66 197 147
Stockholders' investment 15,708 15,746 13,992
Total liabilities and stockholders'
investment $ 55,009 $50,516 $48,711
Net sales $102,919 $83,854 $76,827
W. H. Brady Co. equity in net income $ 5,470 $ 1,666 $ 1,692
7. DOMESTIC AND FOREIGN OPERATIONS
The Company operates predominantly in a single industry as a manufacturer and
distributor of identification products. Operations are conducted in the United
States and through subsidiaries located in Canada, Europe, Australia, Japan and
Singapore. Transfers between geographic areas primarily represent intercompany
export sales of U.S. produced goods and are based on established sales prices
between the related corporations. In computing operating income for non-U.S.
subsidiaries, no allocations of general corporate expenses, interest or income
taxes have been made.
Identifiable assets of subsidiaries are those assets related to the operation
of those subsidiaries. United States assets consist of all other operating
assets of the Company.
United Elimi- Consoli-
States Europe Other nations dated
(Dollars in thousands)
Year ended July 31, 1994:
Sales to unaffiliated
customers $161,024 $64,634 $30,183 $255,841
Transfers between
geographic areas 18,965 7,828 275 $(27,068) 0
Net sales $179,989 $72,462 $30,458 $(27,068) $255,841
Operating income $ 20,039 $ 9,154 $ 821 $ (539) $ 29,475
Identifiable assets $166,501 $36,412 $14,130 $(14,534) $202,509
Year ended July 31, 1993:
Sales to unaffiliated
customers $166,017 $53,912 $23,041 $242,970
Transfers between
geographic areas 17,448 6,572 329 $(24,349)
Net sales $183,465 $60,484 $23,370 $(24,349) $242,970
Operating income $ 21,292 $ 5,117 $ (479) $ (606) $ 25,324
Identifiable assets $164,371 $36,537 $13,979 $(34,986) $179,901
Year ended July 31, 1992:
Sales to unaffiliated
customers $165,136 $51,869 $18,960 $235,965
Transfers between
geographic areas 16,734 5,782 216 $(22,732)
Net sales $181,870 $57,651 $19,176 $(22,732) $235,965
Operating income $ 11,841 $ 5,071 $ (871) $ (700) $ 15,341
Identifiable assets $180,108 $37,155 $11,102 $(55,311) $173,054
W. H. BRADY CO.
Years Ended July 31, 1994 and 1993
W. H. BRADY CO. AND SUBSIDIARIES
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Consolidated Balance Sheets - July 31, 1994 and 1993 2
Consolidated Statements of Income - Years Ended
July 31, 1994, 1993 and 1992 3
Consolidated Statements of Stockholders' Investment -
Years Ended July 31, 1994,
1993 and 1992 4
Consolidated Statements of Cash Flows - Years Ended
July 31, 1994, 1993 and 1992 5-6
Notes to Consolidated Financial Statements 7-16
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of W. H. Brady Co.:
We have audited the accompanying consolidated balance sheets of W. H. Brady Co.
and subsidiaries as of July 31, 1994 and 1993, and the related statements of
income, stockholders' investment and cash flows for each of the three years in
period ended July 31, 1994. These financial statements are the responsbility of
the Company's management. Our responsbility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence'
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the companies at July 31, 1994 and
1993, and the results of their operations and their cash flows for each of the
three years in the period ended July 31, 1994, in conformity with generally
accepted accounting principles.
As discussed in Notes 1, 3 and 4 to the consolidated financial statements, the
companies changed their methods of accounting for postretirement benefits other
than pensions and accounting for income taxes effective August 1, 1991, to
conform with Statement of Financial Accounting Standards No. 106 and No. 109,
respectively.
September 12, 1994
W. H. BRADY CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1994, 1993 AND 1992
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The accompanying consolidated financial
statements include the accounts of W. H. Brady Co. and its subsidiaries, all
of which are wholly-owned. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Cash Equivalents - The Company considers all highly liquid investments with
maturities of three months or less when acquired to be cash equivalents. The
carrying amounts of cash equivalents approximate fair value because they mature
in three months or less.
Inventories - Inventories are stated at the lower of cost or market. Cost has
been determined using the last-in, first-out (LIFO) method for domestic
inventories (approximately 65% and 68% of total inventories at July 31, 1994
and 1993, respectively) and the first-in, first-out method for other
inventories. The difference between the carrying value of domestic inventories
stated at LIFO cost and the value of such inventories stated at replacement
cost was $5,777,000 at July 31, 1994 and $4,718,000 at July 31, 1993.
Depreciation - The cost of buildings and improvements and machinery and
equipment is being depreciated over their estimated useful lives using the
straight-line method for financial reporting purposes.
Catalog Costs - Catalog costs are initially capitalized and amortized over the
estimated useful lives of the publications (generally eight months). At July
31, 1994 and 1993, $2,325,000 and $2,743,000, respectively, of prepaid catalog
costs were included in prepaid expenses and other current assets.
Foreign Currency Translation - Foreign currency assets and liabilities are
translated into United States dollars at end of period rates of exchange, and
income and expense accounts are translated at the weighted average rates of
exchange for the period. Resulting translation adjustments are included as a
separate component of stockholders' investment.
Income Taxes - Effective August 1, 1991, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," which
requires an asset and liability approach to financial accounting and reporting
for income taxes. Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and tax bases of
assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to
the amount expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in
deferred tax assets and liabilities. See Note 4.
Reclassifications - Certain reclassifications have been made to the 1993
consolidated financial statements to conform to those used in 1994.
2. NONRECURRING CHARGE (CREDIT)
During fiscal 1992 the Company recorded a nonrecurring charge of $6,562,000
representing the writedown to estimated net realizable value of a portion of
the Company's investment in two domestic manufacturing operations and a foreign
markketing operation which was sold during 1992. The writedown related
primarily to the carrying value of certain inventories and machinery and
equipment.
During fiscal 1993, the Company sold the two domestic manufacturing operations
and a direct marketing subsidiary. The nonrecurring credit of $1,236,000 in
1993 represents the excess of proceeds over the net carrying amount of net
assets disposed of offset by provision for a severance and other related
disposition expenses.
3. EMPLOYEE BENEFIT PLANS
The Company provides postretirement medical, dental and vision benefits for all
regular full and part-time domestic employees (including spouses) who retire on
or after attainment of age 55 with 15 years of credited service. Credited
service begins accruing at the later of age 40 or date of hire. All active
employees first eligible to retire after July 31, 1992, will be covered by an
unfunded, contributory postretirement healthcare plan where employer
contributions will not exceed a Defined Dollar Benefit amount, regardless of
the cost of the program. Employer contributions to the plan will be based on
the employee's age and service at retirement. Employee contributions range
from 10% at age 55 with 15 years of credited service to 90% at age 65 with 25
years of credited service. For all current retirees and those active employees
eligible to retire as of July 31, 1994, the retirees contribution rate ranges
from 10% to 30%. The medical plan benefits are subject to lifetime maximum
benefits of $1,000 before age 65 and $50,000 after age 65.
Effective August 1, 1991, the Company adopted Statement of Financial
Accounting Standards No. 106 (SFAS No. 106), "Employers' Accounting for
Postretirement Benefits Other than Pensions." The Company had previously
provided for postretirement health care benefits on a pay-as-you-go basis. In
connection with the adoption of SFAS No. 106, the Company elected to recognize
as expense during 1992 the entire accumulated postretirement benefit obligation
(transition obligation) aggregating $6,658,000 as of August 1, 1991 rather than
amortizing such amount to expense over a twenty year period. The Company will
continue to fund benefit costs on a pay-as-you-go basis. During the years
ended July 31, 1994 and 1993, the Company made benefit payments totalling
$186,000 and $153,000 respectively.
The following table sets forth the plan's status reconciled with amounts
recognized in the accompanying consolidated balance sheets at July 31, 1994 and
1993 (Dollars in thousands):
1994 1993
Accumulated postretirement benefit obligation:
Retirees $2,607 $2,576
Fully eligible active plan participants 2,225 2,014
Other active plan participants 1,448 1,434
6,280 6,024
Unrecognized net gain 1,543 1,370
Accrued postretirement benefit cost $7,823 $7,394
1994 1993 1992
Net periodic postretirement benefit cost included the
following components:
Service cost - benefits attributed
to service during the period $209 $ 210 $179
Interest cost on accumulated postretirement
benefit obligation 469 462 601
Amortization of (gain) (64) (58)
Periodic postretirement benefit cost prior
to curtailment 614 614 780
Effective curtailment (gain) due primarily
to disposition of operations (185)
Net periodic postretirement benefit cost $614 $ 429 $780
The assumed health care cost trend rates used in measuring the accumulated
postretirement benefit obligation were 13% in 1994, gradually declining to 6%
by the year 2000.
The weighted average discount rates used in determining the accumulated
postretirement benefit obligation was 8% in 1994 and 1993.
If the health care cost trend rate assumptions were increased by 1%, the
accumulated postretirement benefit obligation as of July 31, 1994 would be
increased by $90,000. The effect of this change on the sum of the service
cost and interest cost would not be material.
During 1993 the Company had a curtailment gain which represented the
accumulated postretirement benefit obligation of employees who were employed at
operations disposed of in 1993.
The Company has retirement and profit sharing plans covering substantially all
full-time domestic employees and certain of its foreign subsidiaries.
Contributions to the plans are determined annually based on earnings of the
respective companies and employee contributions. At July 31, 1994 and 1993,
$3,109,000 and $2,757,000 respectively, of accrued profit sharing contributions
were included in other current liabilities.
The Company also has deferred compensation plans for directors, officers and
key executives utilizing the phantom stock plan concept. At July 31, 1994 and
1993, $15,795,000 and $14,984,000, respectively, of deferred compensation was
included in other liabilities.
The amounts charged to income for the plans described above were $5,660,000 in
1994, $4,443,000 in 1993 and $5,491,000 in 1992.
The Company has a voluntary employee benefit trust for the purpose of funding
employee medical benefits and certain other employee benefits. At July 31,
1994 and 1993, $4,145,000 and $4,543,000, respectively, of payments to the
trust to fund such benefits were included in prepaid expenses and other current
assets.
5. LONG-TERM DEBT
Industrial Development Revenue Bonds and the covering mortgage and loan
agreements require, among other provisions, that the Company maintain minimum
net working capital of $8,000,000 and a defined net worth of $16,000,000. The
bonds are collateralized by first mortgages on certain property with a net
carrying amount of approximately $11,400,000 at July 31, 1994. The Company's
Industrial Development Revenue Bonds approximate fair value.
Maturities on long-term debt are as follows:
Fiscal Year Ending July 31,
(Dollars in thousands)
1995 $ 405
1996 334
1997 316
1998 149
1999 56
Thereafter 1,000
6. STOCKHOLDERS' INVESTMENT
Information as to the Company's capital stock at July 31, 1994 is as follows:
Shares
Authorized Outstanding Amount
(Dollars in thousands)
Preferred Stock, $.01 par value 5,000,000 0
Cumulative Preferred Stock,
$100 par value:
6% Cumulative 5,000 3,984 $ 399
1972 Series 10,000 2,600 260
1979 Series 30,000 21,963 2,196
$ 2,855
Common Stock, $.01 par value:
Class A Nonvoting 10,000,000 5,476,812 $ 54
Class B Voting 10,000,000 1,769,314 18
$ 72
Each share of $100 par value Cumulative Preferred Stock is entitled to receive
cumulative cash dividends and may be redeemed, under certain circumstances, by
the Company at par value plus accrued dividends plus a premium of 6% of the par
value. Such shares, which are held by the initial holder thereof, are subject
to redemption only if the holder consents thereto.
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 $.10 per share. Thereafter, any further dividend in that fiscal
year must be paid on each share of Class A Common Stock and Class B Common
Stock on an equal basis.
Holders of the Class A Common Stock are not entitled to any vote on corporate
matters, unless, in each of the three preceding fiscal years, the $.10
preferential dividend described above has not been paid in full. Holders of
the Class A Common Stock are entitled to one vote per share for the entire
fiscal year immediately following the third consecutive fiscal year in which
the preferential dividend is not paid in full. Holders of Class B Common Stock
are entitled to one vote per share for the election of directors and for all
other purposes.
Upon liquidation, dissolution or winding up of the Company, and after
distribution of any amounts due to holders of Cumulative Preferred Stock,
holders of the Class A Common Stock are entitled to receive the sum of $5.00
per share before any payment or distribution to holders of the Class B Common
Stock. Thereafter, holders of the Class B Common Stock are entitled to receive
a payment or distribution of $5.00 per share. Thereafter, holders of the Class
A Common Stock and Class B Common Stock share equally in all payments or
distributions upon liquidation, dissolution or winding up of the Company.
The preferences in dividends and liquidation rights of the Class A Common Stock
over the Class B Common Stock will terminate at any time that the voting rights
of Class A Common Stock and Class B Common Stock become equal.
The Company has a Nonqualified Stock Option Plan (the Plan) under which 500,000
shares of Class A Nonvoting Common Stock were made available for grant.
Options are issued at an option price equal to the market price at the grant
date. Options granted prior to 1992 become exercisable once the employees
have been continuously employed for six months after the grant date. Generally
options granted in 1992 and thereafter will not be exercisable until one year
after the date of grant, to the extent of one-third per year.
Transactions with respect to the Plan are summarized as follows:
Option Options
Price Outstanding
Balance, August 1, 1991 $20.50 - $28.125 113,900
Options granted 29.8125 43,750
Options exercised 20.50 - 28.125 (15,100)
Balance, July 31, 1992 20.50 - 29.8125 142,550
Options granted 37.125 40,750
Options exercised 20.50 - 29.8125 (26,000)
Options cancelled 20.50 - 29.8125 (7,500)
Balance, July 31, 1993 20.50 - 37.125 149,800
Options granted 36.50 - 43.00 78,400
Options exercised 20.50 - 37.125 (39,650)
Options cancelled 28.125 - 37.125 (9,750)
Balance, July 31, 1994
(93,733 options exercisable) 20.50 - 43.00 178,800
Available for grant after July 31, 1994 225,350
8. NET INCOME PER COMMON SHARE
Net income per common share is computed by dividing net income (after deducting
the applicable Preferred Stock dividends and preferential Class A Common Stock
dividends) by the weighted average Common Shares outstanding of 7,226,038 for
1994; 7,194,545 for 1993 and 7,176,169 for 1992. The preferential dividend on
the Class A Common Stock of $.10 per share has been added to the net income per
Class A Common Share for all years presented.
9. COMMITMENTS
The Company has entered into various noncancellable operating lease agreements.
Rental expense charged to operations was $2,788,000 in 1994; $2,871,000 in 1993
and $2,217,000 in 1992. Future minimum lease payments required under such
leases in effect at July 31, 1994, are as follows (by fiscal year):
1995 $2,086,000
1996 1,832,000
1997 1,444,000
1998 599,000
1999 459,000
Thereafter 1,767,000