Brady Corporation Reports Fiscal 2013 First Quarter Results

Brady Corporation Reports Fiscal 2013 First Quarter Results

MILWAUKEE--(BUSINESS WIRE)-- Brady Corporation (NYS: BRC) ("Brady" or "Company"), a world leader in identification solutions, today reported its financial results for the fiscal 2013 first quarter ended October 31, 2012.

Quarter Ended October 31, 2012 Financial Results:

Sales for the fiscal 2013 first quarter ended October 31, 2012, were down 3.4 percent to $337.6 million compared to $349.5 million in the first quarter of fiscal 2012. Organic sales were down 1.9 percent, the impact of foreign currency translation decreased sales by 2.1 percent, and acquisitions, net of divestitures added 0.6 percent. By segment, organic sales decreased 0.7 percent in the Americas, 3.2 percent in EMEA and 2.5 percent in the Asia-Pacific region.

Net income in the fiscal 2013 first quarter was down 16.9 percent to $27.2 million compared to $32.7 million in the same quarter last year. Excluding the losses in the first quarter of fiscal 2013 from the sales of Brady Medical, a medical die-cut business headquartered in Texas, and Varitronics, a business headquartered in Minnesota serving the education market, net income was down 7.1 percent to $30.4 million.

Earnings per diluted Class A Common Share were down 14.5 percent to $0.53 in the first quarter of fiscal 2013 compared to $0.62 in the same quarter last year. Diluted Earnings per Class A Common Share excluding losses on the sales of businesses were down 4.8 percent to $0.59 in the first quarter of fiscal 2013.

Commentary and Guidance:

"I am pleased with our performance in the quarter as our business in the Americas and Asia-Pacific showed improved results over last quarter. In Asia in particular we benefited from several new product wins in the mobile handset and tablet computer space," said Brady's President and Chief Executive Officer, Frank M. Jaehnert. "Europe continues to be impacted by a difficult economic environment, and we are shifting resources to higher growth opportunities in Central Europe, the Middle East, and Africa. In addition, we are continuing to prune our portfolio of businesses. As we look to the remainder of fiscal 2013, we believe there is limited likelihood that the macro-economy will provide a tailwind. We therefore will continue on the path to create our own growth story by further investing in geographic expansion; expanding globally in certain focus markets, such as aerospace and mass transit, chemical, oil and gas, and food and beverage processing; new product development; customer conversion; and expansion of our digital capabilities to provide the best overall buying experience for our customers."

"We anticipate approximately flat organic sales growth for the full fiscal year 2013, with sales growth in the second half of the year driven by our initiatives," said Brady's Chief Financial Officer Thomas J. Felmer. "We are reiterating our full-year fiscal 2013 earnings per diluted Class A Common Share guidance of between $2.20 and $2.40, exclusive of after-tax restructuring charges and gains or losses on the sales of any businesses. This guidance is based on exchange rates as of October 31, 2012, and a full-year income tax rate in the mid-to-upper 20 percent range."

A webcast regarding Brady's fiscal 2013 first quarter financial results will be available at beginning at 9:30 a.m. Central Time today.

Brady Corporation is an international manufacturer and marketer of complete solutions that identify and protect premises, products and people. Brady's products help customers increase safety, security, productivity and performance and include high-performance labels and signs, safety devices, printing systems and software, and precision die-cut materials. Founded in 1914, the company has millions of customers in electronics, telecommunications, manufacturing, electrical, construction, education, medical and a variety of other industries. Brady is headquartered in Milwaukee, Wisconsin and as of July 31, 2012 employed approximately 6,900 people at operations in the Americas, EMEA and Asia-Pacific. Brady's fiscal 2012 sales were approximately $1.32 billion. Brady stock trades on the New York Stock Exchange under the symbol BRC. More information is available on the Internet at

In this news release, statements that are not reported financial results or other historic information are "forward-looking statements." These forward-looking statements relate to, among other things, the Company's future financial position, business strategy, targets, projected sales, costs, earnings, capital expenditures, debt levels and cash flows, and plans and objectives of management for future operations. The use of words such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "should," "project" or "plan" or similar terminology are generally intended to identify forward-looking statements. These forward-looking statements by their nature address matters that are, to different degrees, uncertain and are subject to risks, assumptions, and other factors, some of which are beyond Brady's control, that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For Brady, uncertainties arise from: the length or severity of the current worldwide economic downturn or timing or strength of a subsequent recovery; increased usage of e-commerce allowing for ease of price transparency; future financial performance of major markets Brady serves, which include, without limitation, telecommunications, hard disk drive, manufacturing, electrical, construction, laboratory, education, governmental, public utility, computer, and transportation; future competition; changes in the supply of, or price for, parts and components; increased price pressure from suppliers and customers; Brady's ability to retain significant contracts and customers; fluctuations in currency rates versus the U.S. dollar; risks associated with international operations; difficulties associated with exports; risks associated with obtaining governmental approvals and maintaining regulatory compliance; Brady's ability to develop and successfully market new products; difficulties in making and integrating acquisitions; risks associated with newly acquired businesses; risks associated with restructuring plans; environmental, health and safety compliance costs and liabilities; technology changes and potential security violations to the Company's information technology systems; Brady's ability to maintain compliance with its debt covenants; increase in our level of debt; potential write-offs of Brady's substantial intangible assets; unforeseen tax consequences; and numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive, and regulatory nature contained from time to time in Brady's U.S. Securities and Exchange Commission filings, including, but not limited to, those factors listed in the "Risk Factors" section within Item 1A of Part I of Brady's Form 10-K for the year ended July 31, 2012.

These uncertainties may cause Brady's actual future results to be materially different than those expressed in its forward-looking statements. Brady does not undertake to update its forward-looking statements except as required by law.

(Dollars in Thousands, Except Per Share Amounts)
Three Months Ended October 31,
 2012   2011 
Net sales$337,646$349,508
Cost of products sold173,026 181,677 
Gross margin164,620167,831
Operating expenses:
Research and development8,4859,809
Selling, general and administrative108,261108,932
Loss (gain) on sales of businesses3,438 - 
Total operating expenses120,184118,741
Operating income44,43649,090
Other income and (expense):
Investment and other income (expense)397(202)
Interest expense(4,163)(5,047)
Income before income taxes40,67043,841
Income taxes13,482 11,109 
Net income$27,188 $32,732 
Per Class A Nonvoting Common Share:
Basic net income$0.53$0.62
Diluted net income$0.53$0.62
Per Class B Voting Common Share:
Basic net income$0.52$0.60
Diluted net income$0.51$0.60
Weighted average common shares outstanding (in thousands):
(Dollars in Thousands)
October 31, 2012July 31, 2012


Current assets:
Cash and cash equivalents$321,309$305,900
Accounts receivable - net218,246199,006
Finished products67,99264,740
Raw materials and supplies26,255 25,407 
Total inventories110,527105,524
Prepaid expenses and other current assets42,400 40,424 
Total current assets692,482650,854
Other assets:
Other intangible assets80,98384,119
Deferred income taxes46,62745,356
Property, plant and equipment:
Buildings and improvements102,592101,962
Machinery and equipment296,561292,130
Construction in progress10,064 10,417 
Less accumulated depreciation288,949 283,145 
Property, plant and equipment - net129,160 130,015 
Total$1,651,424 $1,607,719 


Current liabilities:
Accounts payable$105,348$86,646
Wages and amounts withheld from employees40,52954,629
Taxes, other than income taxes8,2119,307
Accrued income taxes12,15314,357
Other current liabilities44,68640,815
Current maturities on long-term debt61,264 61,264 
Total current liabilities272,191267,018
Long-term obligations, less current maturities259,729254,944
Other liabilities78,538 76,404 
Total liabilities610,458598,366
Stockholders' investment:
Common stock:
Class A nonvoting common stock - Issued 51,261,487 and 51,261,487 shares, respectively and outstanding 47,563,704 and 47,630,926 shares, respectively513513
Class B voting common stock - Issued and outstanding, 3,538,628 shares3535
Additional paid-in capital314,896313,008
Earnings retained in the business749,773732,290
Treasury stock - 3,387,783 and 3,245,561 shares, respectively of Class A nonvoting common stock, at cost(93,535)(92,600)
Accumulated other comprehensive income72,17859,411
Total stockholders' investment1,040,966 1,009,353 
Total$1,651,424 $1,607,719 
(Dollars in Thousands)
Three Months Ended
October 31,
2012 2011 
Operating activities:
Net income$27,188$32,732
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization10,67511,241
Deferred income taxes(109)4,399
Non-cash portion of stock-based compensation expense4,3993,591
Loss (gain) on sales of businesses3,138-
Changes in operating assets and liabilities
(net of effects of business acquisitions/divestitures):
Accounts receivable(18,426)(7,798)
Prepaid expenses and other assets(2,710)(7,384)
Accounts payable and accrued liabilities6,752(21,814)
Income taxes(2,548)7,470 
Net cash provided by operating activities20,21815,281
Investing activities:
Purchases of property, plant and equipment(6,177)(5,817)
Settlement of net investment hedges-(958)
Sales of businesses, net of cash retained10,178-
Net cash provided by (used in) investing activities3,931(7,008)
Financing activities:
Payment of dividends(9,704)(9,690)
Proceeds from issuance of common stock1,684683
Purchase of treasury stock(5,121)(12,309)
Income tax benefit from the exercise of stock options and deferred
compensation distribution, and other400 456 
Net cash used in financing activities(12,741)(20,860)
Effect of exchange rate changes on cash4,001(5,790)
Net increase (decrease) in cash and cash equivalents15,409(18,377)
Cash and cash equivalents, beginning of period305,900 389,971 
Cash and cash equivalents, end of period$321,309 $371,594 
Supplemental disclosures:
Cash paid during the period for:
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