UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO.1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
May 20, 2004
Commission File Number 1-14959
BRADY CORPORATION
(Exact name of registrant as specified in its charter)
Wisconsin 39-0971239
(State of Incorporation) (IRS Employer Identification No.)
6555 West Good Hope Road
Milwaukee, Wisconsin 53223
(Address of Principal Executive Offices and Zip Code)
(414) 358-6600
(Registrant's Telephone Number)
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 1, 2004, Brady Corporation filed a Current Report on Form 8-K to report
the completion of its acquisition of EMED Co., Inc. ("EMED") on May 20, 2004.
Pursuant to Item 7 of Form 8-K, Brady Corporation indicated that it would file
certain financial information under Item 7 of Form 8-K by amendment no later
than the date required. This Amendment is filed to provide the required
financial information and to amend the language of Sections (a), (b), and (c) of
Item 7.
On May 20, 2004, Brady Corporation completed its acquisition of all of the
outstanding securities of EMED pursuant to the Securities Purchase Agreement.
The total purchase price of the EMED acquisition was $191.8 million, net of cash
received. Brady originally funded the EMED acquisition with debt of $160 million
from its recently renegotiated 5-year credit facility as well as a new 364-day
facility and the remainder from internal funds. The 5-year and 364-day
facilities were initially drawn at an all-in interest rate of 2.1%. These
facilities were kept in place until July 21, 2004 and June 28, 2004
respectively. On July 1, Brady announced that it had completed a private
placement of $150 million of 5.14% senior notes due in 2014. The notes, which
will be amortized over 7 years beginning in 2008, were offered and sold to
institutional accredited investors in a private placement pursuant to the terms
of a Note Purchase Agreement dated June 28, 2004, which is attached hereto as
Exhibit 10.1 and incorporated herein by reference.
The Securities Purchase Agreement dated April 2, 2004 and the press release
dated May 21, 2004 were filed as Exhibits 2.1 and 99, respectively, to Brady
Corporation's Form 8-K filed on June 1, 2004 and are incorporated herein by
reference. The foregoing is qualified in its entirety by reference to such
documents.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired
The following financial statements are filed as part of this Current Report on
Form 8-K/A:
EMED consolidated financial statements as of December 31, 2003 and 2002
and for the years then ended.
EMED consolidated financial statements as of March 31, 2004 and the three
months ended March 31, 2004 and 2003.
(b) Pro forma financial information
The following unaudited pro forma condensed consolidated financial information
is filed as part of this Current Report on Form 8-K/A:
Pro forma condensed consolidated balance sheet as of April 30, 2004.
Pro forma condensed consolidated statement of operations for the nine
months ended April 30, 2004.
Pro forma condensed consolidated statement of operations for the year
ended July 31, 2003.
Notes to pro forma condensed consolidated financial statements as of and
for the nine months ended April 30, 2004 and the year ended July 31, 2003.
(c) Exhibits
*2.1 Securities Purchase Agreement, dated April 2, 2004, among
Brady Corporation, EMED Co., Inc., Summit/EMED Holdings, LLC
and the Selling Holders named therein.
10.1 Note Purchase Agreement dated June 28, 2004.
23.1 Consent of PricewaterhouseCoopers LLP (Independent Accountants for
EMED).
*99 Press release of Brady Corporation dated May 21, 2004.
* Previously filed as Exhibits to our Current Report on Form 8-K filed with the
Commission on June 1, 2004, and incorporated herein by reference.
EMED CO., INC .
FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
EMED CO., INC.
INDEX TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
PAGE(s)
REPORT OF INDEPENDENT AUDITORS................................................................................ 1
FINANCIAL STATEMENTS
Balance Sheets................................................................................................ 2
Statements of Income.......................................................................................... 3
Statements of Shareholders' Deficit........................................................................... 4
Statements of Cash Flows...................................................................................... 5
Notes to Financial Statements................................................................................. 6 - 11
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and
Shareholders of EMED Co., Inc.
In our opinion, the accompanying balance sheets and the related statements of
income, shareholders' deficit and cash flows present fairly, in all material
respects, the financial position of EMED Co., Inc. (the "Company") at December
31, 2003 and 2002, and the results of its operations and its cash flows for each
of the years then ended in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
February 13, 2004
1
EMED CO., INC.
BALANCE SHEETS
DECEMBER 31, 2003 AND 2002
2003 2002
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 497,079 $ 1,162,419
Accounts receivable 3,813,524 3,897,425
Inventory 3,934,706 3,909,806
Prepaid catalog costs 2,476,119 2,939,934
Prepaid expenses and other assets 242,302 224,830
------------ ------------
Total current assets 10,963,730 12,134,414
Property and equipment, net 5,662,262 5,165,757
Other assets 539,040 977,134
Deferred income taxes 41,131,000 45,327,000
------------ ------------
Total assets $ 58,296,032 $ 63,604,305
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 1,763,837 $ 1,947,832
Accrued expenses 1,063,025 1,750,347
Accrued interest 689,601 696,284
Current portion of long-term debt 19,731,250 12,910,630
------------ ------------
Total current liabilities 23,247,713 17,305,093
Long-term debt 49,687,593 71,918,842
Shareholders' deficit:
Series A - 8% cumulative redeemable preferred stock, $100 per share
redemption value; 419,000 shares authorized, issued
and outstanding 41,900,000 41,900,000
Series A - 8% cumulative redeemable preferred stock
- accrued dividend 18,144,727 13,696,970
Common stock, $.01 par value; 1,005,000 shares authorized,
123,075 shares issued and outstanding 1,229 1,229
Additional paid-in-capital 4,040 4,040
Accumulated other comprehensive loss (120,716) (539,552)
Accumulated deficit (74,568,554) (80,682,317)
------------ ------------
Total shareholders' deficit (14,639,274) (25,619,630)
------------ ------------
Total liabilities and shareholders' deficit $ 58,296,032 $ 63,604,305
============ ============
The accompanying notes are an integral part of these financial statements
2
EMED CO., INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
2003 2002
----------- ------------
Sales $55,340,014 $56,812,296
Cost of sales:
Material costs 7,423,258 7,524,365
Production labor 2,072,744 2,313,618
Other 599,793 445,349
----------- -----------
Total cost of sales 10,095,795 10,283,332
----------- -----------
Gross margin 45,244,219 46,528,964
Operating expenses 2,319,377 2,447,942
Selling expenses 2,352,009 2,466,240
----------- -----------
Total operating and selling 4,671,386 4,914,182
Marketing expenses 12,049,640 12,471,826
General and administrative 4,257,668 4,393,532
Depreciation 632,936 451,137
----------- -----------
Income from operations 23,632,589 24,298,287
----------- -----------
Other income (expense):
Interest income 12,720 35,415
Interest expense (7,007,105) (8,372,513)
Other income 316 2,267
----------- -----------
(6,994,069) (8,334,831)
----------- -----------
Income before provision for income taxes 16,638,520 15,963,456
Provision for income taxes 6,077,000 5,875,000
----------- -----------
Net income $10,561,520 $10,088,456
=========== ===========
The accompanying notes are an integral part of these financial statements
3
EMED CO., INC.
STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
EMED CO., INC. ADDITIONAL SERIES A
$0.01 PAR COMMON STOCK PAID-IN-CAPITAL PREFERRED STOCK
---------------------- --------------- -----------------------
SHARES AMOUNT AMOUNT SHARES AMOUNT
-------- -------- --------------- -------- -----------
BALANCES AT DECEMBER 31, 2001 122,860 1,227 3,827 419,000 41,900,000
Net income -- -- -- -- --
Other comprehensive income:
Change in fair value of interest
rate swap (net of taxes) -- -- -- -- --
Total comprehensive income
Common stock issued 215 2 213
Series A Preferred Stock dividend -- -- -- -- --
-------- -------- --------------- -------- -----------
BALANCES AT DECEMBER 31, 2002 123,075 $ 1,229 $ 4,040 419,000 $41,900,000
-------- -------- --------------- -------- -----------
Net income -- -- -- -- --
Other comprehensive income:
Change in fair value of interest
rate swap (net of taxes) -- -- -- -- --
Total comprehensive income
Series A Preferred Stock dividend -- -- -- -- --
-------- -------- --------------- -------- -----------
BALANCES AT DECEMBER 31, 2003 123,075 1,229 4,040 419,000 41,900,000
======== ======== =============== ======== ===========
ACCUMULATED
CUMULATIVE OTHER
SERIES A ACCUMULATED COMPREHENSIVE COMPREHENSIVE
DIVIDEND DEFICIT LOSS INCOME
------------ ------------ --------------- -------------
BALANCES AT DECEMBER 31, 2001 9,578,676 (86,652,479) (278,212)
Net income -- 10,088,456 -- $ 10,088,456
Other comprehensive income:
Change in fair value of interest
rate swap (net of taxes) -- -- (261,340) (261,340)
-------------
Total comprehensive income $ 9,827,116
=============
Common stock issued
Series A Preferred Stock dividend 4,118,294 (4,118,294) --
------------ ------------ ---------------
BALANCES AT DECEMBER 31, 2002 $ 13,696,970 $(80,682,317) $ (539,552)
------------ ------------ ---------------
Net income -- 10,561,520 -- $ 10,561,520
Other comprehensive income:
Change in fair value of interest
rate swap (net of taxes) -- -- 418,836 418,836
-------------
Total comprehensive income $ 10,980,356
=============
Series A Preferred Stock dividend 4,447,757 (4,447,757) --
------------ ------------ ---------------
BALANCES AT DECEMBER 31, 2003 18,144,727 (74,568,554) (120,716)
============ ============ ===============
The accompanying notes are an integral part of these financial statements
4
EMED CO., INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
2003 2002
------------ ------------
Cash flows from operating activities:
Net income $ 10,561,520 $ 10,088,456
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation 632,936 451,137
Amortization of debt acquisition costs 434,492 434,492
Gain on sale of assets (316) (800)
Increase in allowance for doubtful accounts -- 25,000
Deferred income taxes 3,952,000 4,025,000
Changes in operating assets and liabilities -
Accounts and other receivables 83,901 275,030
Inventory (24,900) 72,462
Prepaid catalog costs 463,815 (139,451)
Prepaid expenses and other assets (17,472) 209,689
Other assets 3,602 3,102
Accounts payable (183,995) 345,003
Accrued expenses (24,486) 5,544
Accrued interest (6,683) (6,487)
------------ ------------
Net cash provided by operating activities 15,874,414 15,788,177
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (1,131,225) (678,456)
Proceeds from notes receivable -- 289,468
Other 2,100 800
------------ ------------
Net cash used in investing activities (1,129,125) (388,188)
------------ ------------
Cash flows from financing activities:
Borrowings on line of credit 2,500,000 3,000,000
Repayments on line of credit (2,500,000) (3,000,000)
Repayments of long-term debt (15,410,629) (16,829,002)
Issuance of common stock -- 215
------------ ------------
Net cash used in financing activities (15,410,629) (16,828,787)
------------ ------------
Net decrease in cash and cash equivalents (665,340) (1,428,798)
Cash and cash equivalents, beginning of year 1,162,419 2,591,217
------------ ------------
Cash and cash equivalents, end of year $ 497,079 $ 1,162,419
============ ============
Supplemental disclosure of cash flow information:
Income taxes paid $ 2,124,258 $ 1,468,150
============ ============
Interest paid $ 6,575,694 $ 7,940,906
============ ============
Supplemental disclosure of noncash investing and financing activities:
Series A - 8% cumulative redeemable preferred
stock accrued dividend $ 4,447,757 $ 4,118,294
============ ============
The accompanying notes are an integral part of these financial statements
5
EMED CO., INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
1. BUSINESS
EMED Co., Inc. ("EMED" or the "Company") is a majority owned subsidiary of
SUMMIT/EMED Holdings, LLC ("Summit Holdings") and is in the business of
manufacturing and marketing signage and other safety communication
products sold in the United States, through multiple business-to-business
catalogs and the Internet.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include highly liquid investments with original
maturities of 3 months or less.
REVENUE RECOGNITION
The Company recognizes revenue from product sales at the time of shipment.
INVENTORY
Inventory consists of raw materials, finished goods and manufactured goods
and is stated at the lower of cost or market. Cost is determined using the
first-in, first-out method.
ADVERTISING AND CATALOG COSTS
Direct costs incurred in conjunction with printing and distributing mail
order catalogs are deferred and amortized on a basis that approximates the
matching of revenue and expenses over the life of the catalog. Deferred
catalog costs are amortized over six months with amortization commencing
upon the mailing of the catalog. All other advertising costs are expensed
as incurred. Advertising costs incurred amounted to $10,490,573 and
$11,063,179 for the years ended December 31, 2003 and 2002, respectively.
PROPERTY, EQUIPMENT AND ACCUMULATED DEPRECIATION
Property and equipment are stated at cost. Expenditures for repairs and
maintenance are expensed as incurred and renewals and betterments are
capitalized. Depreciation is computed using the straight-line and
accelerated methods over the estimated useful lives of the related assets.
Depreciation expense amounted to $632,936 and $451,137 for the years ended
December 31, 2003 and 2002, respectively.
Asset categories and related estimated useful lives are as follows:
Building and improvements 7 to 39 years
Machinery and equipment 7 to 15 years
Computer equipment 5 years
Furniture and fixtures 5 to 7 years
Vehicles 5 years
INCOME TAXES
The Company accounts for income taxes using the asset and liability
approach. This approach requires the recognition of deferred tax assets
and liabilities for expected future tax consequences of temporary
differences between the carrying amounts and the tax bases of assets and
liabilities.
6
EMED CO., INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
The Company files a consolidated federal income tax return with Summit
Holdings. The Company files state income tax returns on a stand-alone
basis. The Company accounts for its current and deferred federal income
tax provision as that which would result if the Company filed on a
stand-alone basis. Federal income taxes of approximately $36,488,000 and
$40,241,000 included in the Company's balance sheet tax accounts represent
a receivable from Summit Holdings at December 31, 2003 and 2002
respectively.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company utilizes an interest rate swap to reduce interest rate risks.
The Company does not hold or issue derivative financial instruments for
trading purposes. The Company accounts for derivative instruments in
accordance with Statement of Financial Accounting Standards No. 133 ("SFAS
133"), "Accounting for Derivative Instruments and Hedging Activities".
SFAS No. 133 as amended by SFAS No. 138, requires the Company to recognize
all derivatives as either assets or liabilities and measure those
instruments at fair value, and recognize changes in the fair value of
derivatives in net income or other comprehensive income, as appropriate.
In accordance with SFAS 133, the interest rate swap has been deemed
effective and accordingly, the Company records the fair value on the
balance sheets, with unrealized gains or losses deferred in shareholders'
deficit (as a component of other comprehensive loss). For the years ended
December 31, 2003 and 2002, the Company deferred non cash gains (losses)
of $418,836 and $(261,340), net of taxes of $244,000 and $(157,000),
respectively. These deferred gains (losses) will be recognized in income
in the period in which the related interest rates being hedged are
recognized in interest expense.
MANAGEMENT ESTIMATES
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements
and the reported amounts of expenses during the reporting period.
Significant estimates included in these financial statements include the
valuation of net deferred tax assets. The amounts contained within these
financial statements represent management's best estimate of expected
outcomes based on available information. Actual results could differ from
those estimates.
3. INVENTORY
The major classifications of inventory at December 31 are as follows:
2003 2002
---------------- ----------------
Raw materials $ 538,275 $ 578,317
Finished goods 1,671,195 1,616,757
Manufactured goods 1,725,236 1,714,732
---------------- ----------------
$ 3,934,706 $ 3,909,806
================ ================
4. PROPERTY AND EQUIPMENT, NET
The major classifications of property and equipment at December 31 are as
follows:
2003 2002
---------------- ----------------
Land $ 200,844 $ 200,844
Building and improvements 5,352,076 5,348,918
Machinery and equipment 1,987,290 1,887,392
Computer equipment 2,778,271 1,773,784
Furniture and fixtures 1,068,293 1,055,627
Vehicles 11,016 23,344
---------------- ----------------
11,397,790 10,289,909
Less: Accumulated depreciation 5,735,528 5,124,152
---------------- ----------------
$ 5,662,262 $ 5,165,757
================ ================
The title to certain of the Company's operating facilities is held by a
local Industrial Development Agency ("IDA") to enable the Company to
receive property tax abatements. The Company leases the property from IDA
through the year 2012 with no annual lease payments. At the end of the
lease, title reverts to the Company for consideration of $1. The land and
building are treated as owned by
7
EMED CO., INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
the Company for financial statement purposes.
5. OTHER ASSETS
Other assets at December 31 are comprised of:
2003 2002
---------------- ----------------
Debt acquisition costs, net $ 527,183 $ 961,674
Other 11,857 15,460
---------------- ----------------
$ 539,040 $ 977,134
================ ================
The debt acquisition costs represent costs related to the acquisition of
the Term Loan Agreement. The costs are amortized over the life of the term
loan and are components of interest expense. The amortization of these
costs amounted to $434,492 for each of the years ended December 31, 2003
and 2002.
6. LONG-TERM DEBT
2003 2002
------------------ -----------------
Term loans $ 43,418,843 $ 58,829,472
12% subordinate debenture 26,000,000 26,000,000
------------------ -----------------
69,418,843 84,829,472
Current portion (19,731,250) (12,910,630)
------------------ -----------------
$ 49,687,593 $ 71,918,842
================== =================
The Company and Summit Holdings entered into a Term Loan and Revolving
Credit Agreement (the "Agreement") with certain banks in 1999. The
Agreement consists of two term loans and a $15,000,000 Revolving Credit
Facility. Term Loan A, with an original maturity date of April 30, 2004
was paid off during the year ended December 31, 2003. Term Loan B, with a
balance of $43,418,843 at December 31, 2003 matures on April 30, 2006. The
entire amount of the debt related to this Agreement has been allocated to
the Company. The Agreement is collateralized by substantially all of the
Company's assets and is guaranteed by Summit Holdings.
The Company is required to make variable payments of principal and
interest quarterly on the Term Loan. Interest on the Term Loan is payable,
at the Company's option, at predetermined rates above prime or LIBOR
determined on the basis of Company performance as determined by its
leverage ratio. At December 31, 2003 and 2002, the weighted average
interest rate of the Term Loan was 4.60% and 6.91%, respectively.
There was no balance outstanding under the Company's $15,000,000 Revolving
Credit Facility at December 31, 2003 and 2002. The Revolving Credit
Facility matures on April 30, 2004. Interest is payable under the
Revolving Credit Facility, at the Company's option, at rates above prime
or LIBOR determined by its leverage ratio.
The Company entered into an interest rate swap agreement (the "Swap") on
March 28, 2002 whereby the Company pays a fixed interest rate of 4.205% on
the notional amount of the Swap which was $25,000,000 at December 31,
2003. A major financial institution, as counterparty to the agreement,
pays the Company interest at a floating rate based on three-month LIBOR on
the notional amount during the term of the agreement. Interest payments
are made quarterly by both parties and the Swap matures on March 31, 2004.
The interest rate swap has been deemed effective as a hedge and,
accordingly, any difference between amounts paid and received is recorded
as interest expense. The Company is at risk of loss from this Swap
agreement in the event of nonperformance by the counterparty.
8
EMED CO., INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
The Term Loan contains a mandatory prepayment based upon excess cash flow,
as defined in the Agreement. Mandatory prepayments of $814,635 and
$2,742,937 were required during 2003 and 2002, respectively. In 2004, no
mandatory prepayment based on excess cash flow is required.
The Company entered into a $26,000,000 subordinated debenture agreement,
primarily with a related party. The entire principal amount is due October
31, 2006 with required quarterly interest payments at an annual rate of
12%. The debenture is subordinate to the Term Loans and the Revolving
Credit Facility and is secured by a subordinate interest in substantially
all the assets of the Company.
The Company's long-term debt maturities for the five years following
December 31, 2003 and thereafter are as follows:
AMOUNT
-----------------
2004 19,731,250
2005 23,687,593
2006 26,000,000
2007 -
-----------------
$ 69,418,843
=================
The Term Loan and Revolving Credit Facility Agreement contains, among
other provisions, requirements to maintain minimum levels of net worth,
minimum debt service coverage ratios, interest coverage and leverage
ratios, and certain reporting requirements. At December 31, 2003, the
Company was in compliance with these amended covenants.
The fair value of the Company's subordinated debt is estimated based upon
discounted cash flows. The discount rate utilized in estimating fair value
represents the risk adjusted rate at which management estimated it could
borrow under similar terms and maturities as of December 31, 2003 and
2002. Actual rates can only be determined through formal negotiations. At
December 31, 2003 and 2002, the estimated fair value of the debt exceeds
the carrying value by approximately $2,000,000 and $3,000,000,
respectively.
7. INCOME TAXES
The provision for income taxes at December 31 are comprised of:
2003 2002
----------------- -----------------
Current:
Federal $ 1,925,000 $ 1,642,000
State 200,000 208,000
----------------- -----------------
2,125,000 1,850,000
Deferred:
Federal 3,514,000 3,611,000
State 438,000 414,000
----------------- -----------------
3,952,000 4,025,000
----------------- -----------------
$ 6,077,000 $ 5,875,000
================= =================
The provision for income taxes differs from the "expected" tax expense
computed by applying the U.S. federal corporate tax rate of 34% to
earnings before income taxes primarily as a result of state income taxes.
The gross deferred tax assets and liabilities are as follows:
2003 2002
------------------ -----------------
Deferred tax assets $ 42,678,000 $ 47,023,000
Deferred tax liabilities (1,547,000) (1,696,000)
------------------ -----------------
Net deferred tax asset $ 41,131,000 $ 45,327,000
================== =================
Deferred income taxes at December 31, 2003 and 2002 result principally
from temporary differences between the accounting and tax bases of
goodwill and property and equipment.
Realization of the net deferred tax asset is dependent upon generating
sufficient taxable income over the periods in which the temporary
differences are anticipated to reverse (primarily tax goodwill
amortization over 15 years). Although realization is not assured,
management believes it is more likely than not that the net deferred tax
asset will be realized. Accordingly, no valuation allowance against the
net deferred tax assets has been recorded. However, if estimates of future
taxable income are reduced, it may be necessary to record a valuation
allowance at that time.
9
EMED CO., INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
8. EQUITY
The Preferred Shares have a redemption value of $100 per share plus any
accumulated and unpaid dividends. The preferred shares are redeemable at
the option of the holder in the event of a sale, merger, or winding up of
the company ("liquidity event"). If no liquidity event has occurred on or
before October 31, 2006, the holders of the majority share of the
Preferred Shares may, at their election, but subject to the senior debt
covenants, require the Company to redeem all of the Preferred Shares for
the redemption value plus any accumulated and unpaid dividends.
The Preferred Shares' 8% dividend accumulates, compounds annually and is
payable in cash when and as declared by the Board of Directors provided
that the payments of such dividends shall be subordinate to the
indefeasible payment in full of all obligations under any loan or other
credit facility. The Preferred Shareholders are entitled to one vote per
share on all matters submitted to the shareholders of the Company.
The common stock shareholders also have certain redemption rights, which
allow for the repurchase of shares after October 31, 2006 upon the
occurrence of certain events. The price to be paid will be based on the
fair market value of the stock, as defined in the Agreement.
During 2002, 215 shares of restricted common stock were issued to an
officer for $1.00 per share, which approximates its fair market value. The
shares vest at a rate of 25% upon their first anniversary and remaining
shares vest daily on a pro rata basis thereafter until 2005.
9. 401(K) AND PROFIT-SHARING PLANS
The Company has in effect a 401(k) plan covering substantially all Company
employees who meet certain age and length-of-service requirements.
Eligible employees may defer contributions up to the maximum allowed by
the Internal Revenue Service regulations. There is no provision for
Company matching contributions to the plan. Also, the Company has in
effect a profit-sharing plan covering substantially all Company employees
who meet certain age and length-of-service requirements. Company
contributions to the plan amounted to approximately $138,467 and $199,898
for the years ended December 31, 2003 and 2002, respectively.
10. FLEXIBLE BENEFITS PLAN
The Company has in effect a flexible benefits plan covering all full-time
Company employees who are eligible for coverage under the Employer's group
medical insurance plan. The Company contributes 47% or 73% toward the
Employer's medical insurance plan based on the type of coverage the
employee carries. Upon completion of 1 year of service, employees are
eligible to receive a 5% Company discretionary contribution of the
employee's annual salary to be used by the employee to cover certain
reimbursable expenses as defined in the plan. Company contributions to the
plan amounted to approximately $227,777 and $222,857 for the years ended
December 31, 2003 and 2002.
10
EMED CO., INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
11. COMMITMENTS AND CONTINGENCIES
The Company may become subject to legal claims arising in the ordinary
course of business. The Company does not believe that it is a party to any
proceedings at the present time that could have a material adverse impact
on the financial position of the Company. There can be no assurance,
however, that unforeseen circumstances will not result in a significant
loss.
12. SIGNIFICANT CONCENTRATION OF CREDIT RISK
The Company maintains accounts at several financial institutions, which
may exceed federally insured amounts at various times during the year.
13. RELATED PARTY TRANSACTION
During 2003 and 2002, the Company incurred $3,163,333 in interest expense
with individuals or corporations who were either shareholders or were
controlled by shareholders of the Company. As of December 31, 2003 and
2002, approximately $667,000 is recorded as a component of accrued
interest.
11
EMED CO.
UNAUDITED NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2004
EMED Co., Inc. ("EMED" or the "Company") is a manufacturer and marketer of
signage and other safety communication products sold in the United States,
through multiple business-to-business catalogs and the Internet.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Management has prepared the financial statements of the Company in
accordance with accounting principles generally accepted in the United
States of America (GAAP) for interim financial reporting. Accordingly,
they do not include all of the information and notes required by GAAP for
annual financial statements. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, considered
necessary for a fair presentation have been included. The interim
financial statements should be read in conjunction with the annual
consolidated financial statements and notes thereto as of December 31,
2003. Accounting policies followed in preparation of the annual financial
statements are consistent with those used in preparation of the March 31,
2004 interim financial statements.
These financial statements have been prepared on a going concern basis,
which presumes the realization of assets and discharge of liabilities in
the normal course of operations for the foreseeable future.
2. SUBSEQUENT EVENTS
On April 5, 2004, the Company announced that it had entered into a
definitive agreement pursuant to which all of the outstanding securities
of the Company would be sold to Brady Corporation ("Brady"). Brady is an
international manufacturer and marketer of complete identification
solutions, with products including labels, software, printing systems,
label-application and data-collection systems, signs, safety devices and
specialty materials for manufacturing, electrical, electronic,
telecommunications and a variety of other markets. Under the terms of the
agreement, which was consummated on May 20, 2004, Brady acquired all of
the outstanding securities of EMED for approximately $191.8 million U.S.
dollars in cash, net of cash received.
EMED CO., INC.
UNAUDITED BALANCE SHEET
(AMOUNTS IN THOUSANDS OF U.S. DOLLARS)
MARCH 31,
2004
ASSETS
Current Assets:
Cash and cash equivalents $ 1,920
Accounts receivable, less allowance for losses of $104 5,378
Inventory
3,958
Prepaid catalog costs 2,943
Prepaid expenses and other assets 220
--------
Total Current Assets 14,419
Property and Equipment, net 5,586
Other assets 430
Deferred income taxes 40,071
--------
Total Assets $ 60,506
========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable $ 1,180
Accrued expenses 1,008
Accrued interest 640
Current portion of long-term debt 26,125
--------
Total Current Liabilities 28,953
Long Term Debt 43,156
Shareholders' Deficit:
Series A - 8% cumulative redeemable preferred stock, $100 per share
redemption value, 419,000 shares authorized, issued
and outstanding 41,900
Series A - 8% cumulative redeemable preferred stock
- accrued dividend 19,346
Common Stock, $,01 par value, 1,005,000 shares authorized
123,075 shares issued and outstanding 1
Additional Paid in Capital 4
Accumulated other comprehensive loss -
Accumulated deficit (72,854)
--------
Total Shareholders' Deficit (11,603)
--------
Total Liabilities and Shareholders' Deficit $ 60,506
========
See accompanying notes
EMED CO., INC.
UNAUDITED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS OF U.S. DOLLARS)
THREE MONTHS ENDED
MARCH 31, MARCH 31,
2004 2003
SALES $ 14,564 $ 14,969
Cost of sales:
Material costs 2,043 1,982
Production labor 536 530
Other 145 137
------------- -------------
Total cost of sales 2,724 2,649
Gross margin 11,840 12,320
Operating Expenses 626 613
Selling Expenses 655 626
------------- -------------
Total operating and selling 1,281 1,239
Marketing expenses 3,312 3,359
General and administrative 1,048 1,155
Depreciation 189 135
------------- -------------
Income from operations 6,010 6,432
Other income (expense):
Interest income 1 2
Interest expense (1,635) (1,798)
------------- -------------
(1,634) (1,796)
------------- -------------
Income before provision for income taxes 4,376 4,636
Provision for income taxes 1,460 1,736
------------- -------------
Net income $ 2,916 $ 2,900
============= =============
See accompanying notes
EMED CO., INC.
UNAUDITED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31 MARCH 31
2004 2003
Cash flows from operating activities:
Net income $ 2,916 $ 2,900
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation 190 135
Amortization of debt acquisition costs 110 110
Deferred income taxes 1,060 1,007
Changes in operating assets and liabilities -
Accounts and other receivables (1,571) (1,580)
Inventory (23) 358
Prepaid catalog costs (467) (823)
Prepaid expenses and other assets 28 74
Accounts payable (584) (713)
Accrued expenses 66 424
Accrued interest (50) (55)
------- -------
Net cash provided by operating activities 1,675 1,837
------- -------
Cash flows from investing activities:
Purchases of property and equipment (114) (88)
------- -------
Net cash used in investing activities (114) (88)
------- -------
Cash flows from financing activities:
Borrowings on line of credit 1,500 1,500
Repayment of line of credit (1,500) -
Repayments of long-term debt (138) (2,888)
------- -------
Net cash used in financing activities (138) (1,388)
------- -------
Net increase in cash and cash equivalents 1,423 361
Cash and cash equivalents, beginning of year 497 1,162
------- -------
Cash and cash equivalents, end of period $ 1,920 $ 1,523
======= =======
Supplemental disclosure of cash flow information:
Income taxes paid $ 171 $ 88
======= =======
Interest paid $ 1,577 $ 1,743
======= =======
Supplemental disclosure of noncash investing and financing activities:
Series A - 8% cumulative redeemable preferred $ 1,201 $ 1,112
======= =======
stock accrued dividend
See accompanying notes
PRO FORMA FINANCIAL INFORMATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On May 20, 2004, Brady Corporation ("Brady") completed its previously announced
acquisition, by way of a securities purchase agreement (the "Agreement"), of all
of the outstanding securities of EMED Co., Inc. ("EMED"). Under the terms of the
Agreement, Brady acquired all of the outstanding securities and assets of EMED
for approximately $191.8 million in cash.
Brady funded the transaction with debt of $150 million and the remainder in
cash. On July 1 2004, Brady announced that it had completed a private placement
of $150 million of 5.14% senior notes due in 2014. The notes, which will be
amortized over 7 years beginning in 2008, were offered and sold to institutional
accredited investors in a private placement. Under the terms of the agreement
pursuant to which the senior notes were sold, Brady must meet the following
covenants, including others:
1. Consolidated Debt to Consolidated EBITDA - Brady will not at any
time permit the ratio of Consolidated Debt to Consolidated EBITDA
(calculated as at the end of each fiscal quarter for the four
consecutive quarters then ended) to exceed 3.50 to 1.00.
2. Priority Debt - Brady will not, at any time, permit the aggregate
amount of all Priority Debt to exceed 25% of Consolidated Net Worth,
determined as of the end of Brady's then most recently ended fiscal
quarter.
The following presents certain unaudited pro forma condensed consolidated
financial information of Brady as of April 30, 2004 and for the 9 months then
ended and for the year ended July 31, 2003. The unaudited pro forma condensed
consolidated balance sheet was prepared as if the EMED acquisition took place on
April 30, 2004 and the unaudited pro forma condensed statements of operations
were prepared as if the EMED acquisition took place on August 1, 2002. The
financial statements give pro forma effect to (i) cash and debt used to fund the
EMED acquisition, and (ii) preliminary allocation of purchase price based upon
fair value of the assets acquired and liabilities assumed.
The unaudited pro forma condensed consolidated financial statements reflect pro
forma adjustments that are based upon available information and certain
assumptions that management believes are reasonable. The unaudited pro forma
condensed consolidated financial statements do not purport to represent Brady's
results of operations or financial position that would have resulted had the
transactions been consummated as of the date or for the periods indicated. The
unaudited pro forma condensed consolidated financial statements reflect
preliminary estimates of the allocation of the purchase price for the
acquisition that may be adjusted. Management does not expect such adjustments to
be significant.
The unaudited pro forma condensed consolidated financial statements and
accompanying notes should be read in conjunction with the historical financial
statements of Brady contained in its 2003 Annual Report and the historical
financial statements of EMED contained herein.
BRADY CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
APRIL 30, 2004
(AMOUNTS IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
BRADY EMED PRO FORMA PRO FORMA
ASSETS (1) (2) ADJUSTMENTS CONSOLIDATED
------------- ------------ ------------- --------------
CURRENT ASSETS:
Cash and cash equivalents $ 79,831 $ 1,920 $ (46,532) (3) $ 35,219
Accounts receivable, less allowance for losses 101,800 5,378 - 107,178
Inventories 45,189 3,958 1,405 (4) 50,552
Prepaid expenses and other current assets 22,125 3,163 107 (5) 25,395
------------- ------------ ------------- --------------
TOTAL CURRENT ASSETS 248,945 14,419 (45,020) 218,344
------------- ------------ ------------- --------------
OTHER ASSETS:
Goodwill 159,122 - 100,047 (6) 259,169
Other 25,904 40,501 35,465 (7) 101,870
------------- ------------ ------------- --------------
185,026 40,501 135,512 361,039
PROPERTY, PLANT AND EQUIPMENT:
Cost:
Land 5,244 201 800 (8) 6,245
Buildings and improvements 54,658 5,352 (1,479) (8) 58,531
Machinery and equipment 149,233 5,958 (4,056) (8) 151,135
Construction in progress 1,858 - - 1,858
------------- ------------ ------------- --------------
210,993 11,511 (4,735) 217,769
Less accumulated depreciation 131,119 5,925 (5,925) (8) 131,119
------------- ------------ ------------- --------------
NET PROPERTY, PLANT AND EQUIPMENT 79,874 5,586 1,190 86,650
------------- ------------ ------------- --------------
TOTAL $ 513,845 $ 60,506 $ 91,682 $ 666,033
============= ============ ============= ==============
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable $ 33,240 $ 1,180 $ - $ 34,420
Wages and amounts withheld from employees 33,580 365 - 33,945
Taxes, other than income taxes 4,563 26 - 4,589
Accrued income taxes 20,000 449 - 20,449
Other current liabilities 22,675 808 (640) (9) 22,843
Short-term borrowings and current maturities
on long-term debt 32 26,125 (26,125)(10) 32
TOTAL CURRENT LIABILITIES 114,090 28,953 (26,765) 116,278
LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES 28 43,156 106,844 (11) 150,028
OTHER LIABILITIES 20,657 - - 20,657
TOTAL LIABILITIES 134,775 72,109 80,079 286,963
STOCKHOLDERS' INVESTMENT:
Capital Stock 238 61,247 (61,247)(12) 238
Additional paid-in capital 60,870 4 (4)(13) 60,870
Income retained in the business 311,089 (72,854) 72,854 (14) 311,089
Treasury Stock - 34,657 and 18,262 shares, at cost (1,074) - - (1,074)
Cumulative other comprehensive income 8,315 - - 8,315
Other (368) - - (368)
TOTAL STOCKHOLDERS' INVESTMENT 379,070 (11,603) 11,603 379,070
TOTAL $ 513,845 $ 60,506 $ 91,682 $ 666,033
============= ============ ============= ==============
BRADY CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED APRIL 30, 2004
(AMOUNTS IN THOUSANDS OF U.S. DOLLARS EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
BRADY EMED PRO FORMA PRO FORMA
(15) (16) ADJUSTMENTS CONSOLIDATED
---------- ----------- ------------ ------------
NET SALES $ 485,708 $ 40,122 $ - $ 525,830
Cost of products sold 233,841 7,538 3,368 (17) 244,747
--------- --------- ---------- ---------
Gross margin 251,867 32,584 (3,368) 281,083
Operating expenses:
Research and development 16,680 - - 16,680
Selling, general and administrative 181,373 15,365 (121)(18) 196,617
Restructuring charge - net 2,274 - - 2,274
--------- --------- ---------- ---------
Total operating expenses 200,327 15,365 (121) 215,571
Operating income 51,540 17,219 (3,247) 65,512
Other income and (expense):
Investment and other (expense) income (429) 10 - (419)
Interest expense (36) (5,066) (761)(19) (5,863)
--------- --------- ---------- ---------
Income before income taxes 51,075 12,163 (4,008) 59,230
Income taxes 16,290 4,271 (1,278)(20) 19,283
--------- --------- ---------- ---------
Net income 34,785 7,892 (2,730) 39,947
Income retained in business at beginning of period 290,805 (77,322) 77,322 (21) 290,805
Less:
Redemption premium on preferred stock - - - -
Common stock dividends (14,501) - - (14,501)
Preferred dividends - (3,424) 3,424 (21) -
Income retained in business at end of period $ 311,089 $ (72,854) $ 78,016 $ 316,251
========= ========= ========== =========
Net income per Class A Nonvoting Common Share
Basic $ 1.48 $ 1.70
========= =========
Diluted $ 1.46 $ 1.68
========= =========
Net income per Class B Voting Common Share
Basic $ 1.45 $ 1.67
========= =========
Diluted $ 1.43 $ 1.64
========= =========
BRADY CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 2003
(AMOUNTS IN THOUSANDS OF U.S. DOLLARS EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
BRADY EMED PRO FORMA PRO FORMA
(22) (23) ADJUSTMENTS CONSOLIDATED
----------- ---------- ------------ ------------
Net sales $ 554,866 $ 57,248 $ - $ 612,114
Cost of products sold 274,593 10,390 4,797 (24) 289,780
---------- ---------- --------- ----------
Gross margin 280,273 46,858 (4,797) 322,334
Operating expenses:
Research and development 18,873 - - 18,873
Selling, general and administrative 219,662 22,530 (758)(25) 241,434
Restructuring charge - net 9,589 - - 9,589
---------- ---------- --------- ----------
Total operating expenses 248,124 22,530 (758) 269,896
Operating income 32,149 24,328 (4,039) 52,438
Other income and (expense):
Investment and other (expense) income 427 23 - 450
Interest expense (121) (7,540) (218)(26) (7,879)
---------- ---------- --------- ----------
Income before income taxes 32,455 16,811 (4,257) 45,009
Income taxes 11,035 6,227 (1,447)(27) 15,815
---------- ---------- --------- ----------
Net income 21,420 10,584 (2,810) 29,194
Income retained in business at beginning of period 287,674 (83,622) 83,622 (28) 287,674
Less:
Redemption premium on preferred stock (171) - - (171)
Common stock dividends (18,118) - - (18,118)
Preferred stock dividends - (4,284) 4,284 (28) -
Income retained in business at end of period $ 290,805 $ (77,322) $ 85,096 $ 298,579
========== ========== ========= ==========
Net income per Class A Nonvoting Common Share
Basic $ 0.92 $ 1.26
========== ==========
Diluted $ 0.91 $ 1.25
========== ==========
Net income per Class B Voting Common Share
Basic $ 0.89 $ 1.25
========== ==========
Diluted $ 0.88 $ 1.24
========== ==========
BRADY CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF
APRIL 30, 2004 AND THE YEAR ENDED JULY 31, 2003
(IN U.S. DOLLARS)
(UNAUDITED)
The acquisition will be accounted for in accordance with the purchase method.
Based on an evaluation of the net tangible and intangible assets acquired, Brady
has allocated the total cost of the acquisition of EMED as follows (amounts in
thousands):
Purchase price, net of cash received $ 191,827
Estimated transaction costs 2,100
----------------
Total consideration $ 193,927
================
Estimated Lives
In years
Assets, less cash received $ 60,768 N/A
Liabilities (2,188) N/A
Trade name/trademark* 13,900 N/A
Customer list* 21,100 7
Non-competes* 300 2
Goodwill 100,047 N/A
-----------------
$ 193,927
=================
*Utilized external valuation to determine fair value.
In connection with the EMED acquisition, the Company entered into a Note
Purchase Agreement (the "Agreement") pursuant to which it issued to
institutional accredited investors $150 million of 5.14% senior notes due 2014
in a private placement exempt from the registration requirements of the
Securities Act of 1933. The notes will be amortized over 7 years beginning in
2008.
The Company's long-term debt maturities for the life of the notes are as follows
(in thousands):
Amount
-----------
2004 $ 0
2005 0
2006 0
2007 0
2008 21,429
Thereafter 128,571
-----------
$ 150,000
===========
The unaudited pro forma condensed consolidated financial statements reflect
preliminary estimates of the allocation of the purchase price for the
acquisition that may be adjusted. Management does not expect any adjustments to
be significant.
The unaudited pro forma condensed consolidated financial statements are
presented for illustrative purposes only, giving effect to the acquisition, as
described and therefore are not indicative of the operating results that might
have been achieved had the combination occurred as of an earlier date, nor are
they indicative of operating results which may occur in the future.
The unaudited condensed consolidated financial statements are derived from the
Company's Form 10-Q for the quarter ended April 30, 2004 and the Form 10-K for
the year ended July 31, 2003 as filed with the Securities and Exchange
Commission.
The unaudited pro forma condensed consolidated balance sheet includes the
adjustments necessary to give effect to the acquisition as if it had been
consummated at April 30, 2004 and to reflect the allocation of the purchase
price to the fair value of tangible assets acquired and liabilities assumed.
Adjustments included in the pro forma condensed consolidated balance sheet are
summarized as follows (in thousands):
(1) Represents the Company's historical condensed consolidated
balance sheet at April 30, 2004
(2) Represents the historical consolidated balance sheet for EMED at March 31,
2004
(3) Recognition of cash outlay related to EMED acquisition
(4) Represents write-up of inventory to fair market value
(5) Recognition of tax receivable related to amounts paid by seller,
tax deduction to be taken by Brady
(6) Recognition of goodwill related to EMED purchase
(7) Represents elimination of EMED financing fees $ (419)
Recognition of other identifiable intangibles related to acquisition
of EMED 35,300
Recognition of financing fees to be amortized over 10 years 584
---------
$ 35,465
=========
(8) Recognition of adjustment of fixed assets to fair market value and
elimination of accumulated depreciation
(9) Represents elimination of EMED accrued interest assumed by seller
(10) Represents elimination of EMED short-term debt assumed by seller
(11) Represents elimination of EMED long-term debt assumed by seller $ (43,156)
Represents private placement financing 150,000
---------
$ 106,844
=========
(12) Represents elimination of EMED capital stock
(13) Represents elimination of EMED Additional Paid-in-Capital
(14) Represents elimination of EMED accumulated deficit
The unaudited pro forma condensed consolidated statements of operations give
effect to the acquisition as if it had been consummated as of August 1, 2002.
The adjustments that follow are those that are required by Article 11 of
Regulation S-X (in thousands).
(15) Represents Brady condensed consolidated historical statement of operations
for the nine months ended April 30, 2004
(16) Represents EMED historical statement of operations for the nine months
ended March 31, 2004
(17) Reclassify expenses classified as cost of sales by Brady,
operating expenses by EMED $ 2,493
Represents amortization of inventory fair market value write-up
875
--------
$ 3,368
========
(18) Recognition of amortization of intangibles $ 2,372
Reclassify expenses classified as cost of sales by Brady
operating expense by EMED (2,493)
---------
$ (121)
=========
(19) Represents elimination of EMED interest expense and financing fees $ 5,066
Recognition of interest expense related to debt acquired upon acquisition
of EMED (5,783)
Recognition of amortization of financing fees on $150 million private
placement debt by Brady (44)
---------
$ (761)
=========
(20) Represents taxes on pro-forma adjustments
(21) Represents elimination of EMED Income retained in business & preferred
dividends.
(22) Represents Brady historical statement of operations for the year ended
July 31, 2003
(23) Represents EMED historical statement of operations for the year ended June
30, 2003
(24) Reclassify expenses classified as cost of sales by Brady, operating
expenses by EMED $ 3,922
Represents amortization of inventory fair market value
write-up 875
---------
$ 4,797
=========
(25) Recognition of amortization of intangibles $ 3,164
Reclassify expenses classified as cost of sales by Brady, operating
expenses by EMED (3,922)
---------
(758)
=========
(26) Represents elimination of EMED interest expense and financing fees $ 7,540
Recognition of interest expense related to debt acquired upon
acquisition of EMED (7,700)
Recognition of amortization of financing fees on the $150
million private placement debt by Brady (58)
---------
$ (218)
=========
(27) Represents taxes on pro forma adjustments
(28) Represents elimination of EMED Income retained in business and preferred
dividends.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BRADY CORPORATION
Date: August 3, 2004 /s/ David Mathieson
--------------------
David Mathieson
Vice President &
Chief Financial Officer
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
*2.1 Securities Purchase Agreement, dated April 2,
2004, among Brady Corporation, EMED Co., Inc.,
Summit/EMED Holdings, LLC and the Selling Holders
named therein.
10.1 Note Purchase Agreement dated June 28, 2004.
23.1 Consent of PricewaterhouseCoopers LLP (Independent
Accountants for EMED).
* 99 Press Release of Brady Corporation dated May 21, 2004.
*Previously filed, as Exhibits to our Current Report on Form 8-K filed with the
Commission on June 1, 2004, and incorporated herein by reference.