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 www.bradycorp.com 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 www.bradycorp.com.

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.

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in Thousands, Except Per Share Amounts)

(Unaudited)

Three Months Ended October 31,

2012

2011

Net sales

$

337,646

$

349,508

Cost of products sold

173,026

181,677

Gross margin

164,620

167,831

Operating expenses:

Research and development

8,485

9,809

Selling, general and administrative

108,261

108,932

Loss (gain) on sales of businesses

3,438

-

Total operating expenses

120,184

118,741

Operating income

44,436

49,090

Other income and (expense):

Investment and other income (expense)

397

(202

)

Interest expense

(4,163

)

(5,047

)

Income before income taxes

40,670

43,841

Income taxes

13,482

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

Dividends

$

0.19

$

0.185

Per Class B Voting Common Share:

Basic net income

$

0.52

$

0.60

Diluted net income

$

0.51

$

0.60

Dividends

$

0.173

$

0.168

Weighted average common shares outstanding (in thousands):

Basic

51,039

52,657

Diluted

51,312

52,954

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

(Unaudited)

October 31, 2012

July 31, 2012

ASSETS

Current assets:

Cash and cash equivalents

$

321,309

$

305,900

Accounts receivable - net

218,246

199,006

Inventories:

Finished products

67,992

64,740

Work-in-process

16,280

15,377

Raw materials and supplies

26,255

25,407

Total inventories

110,527

105,524

Prepaid expenses and other current assets

42,400

40,424

Total current assets

692,482

650,854

Other assets:

Goodwill

680,595

676,791

Other intangible assets

80,983

84,119

Deferred income taxes

46,627

45,356

Other

21,577

20,584

Property, plant and equipment:

Cost:

Land

8,892

8,651

Buildings and improvements

102,592

101,962

Machinery and equipment

296,561

292,130

Construction in progress

10,064

10,417

418,109

413,160

Less accumulated depreciation

288,949

283,145

Property, plant and equipment - net

129,160

130,015

Total

$

1,651,424

$

1,607,719

LIABILITIES AND STOCKHOLDERS' INVESTMENT

Current liabilities:

Accounts payable

$

105,348

$

86,646

Wages and amounts withheld from employees

40,529

54,629

Taxes, other than income taxes

8,211

9,307

Accrued income taxes

12,153

14,357

Other current liabilities

44,686

40,815

Current maturities on long-term debt

61,264

61,264

Total current liabilities

272,191

267,018

Long-term obligations, less current maturities

259,729

254,944

Other liabilities

78,538

76,404

Total liabilities

610,458

598,366

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, respectively

513

513

Class B voting common stock - Issued and outstanding, 3,538,628 shares

35

35

Additional paid-in capital

314,896

313,008

Earnings retained in the business

749,773

732,290

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 income

72,178

59,411

Other

(2,894

)

(3,304

)

Total stockholders' investment

1,040,966

1,009,353

Total

$

1,651,424

$

1,607,719

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

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 amortization

10,675

11,241

Deferred income taxes

(109

)

4,399

Non-cash portion of stock-based compensation expense

4,399

3,591

Loss (gain) on sales of businesses

3,138

-

Changes in operating assets and liabilities

(net of effects of business acquisitions/divestitures):

Accounts receivable

(18,426

)

(7,798

)

Inventories

(8,141

)

(7,156

)

Prepaid expenses and other assets

(2,710

)

(7,384

)

Accounts payable and accrued liabilities

6,752

(21,814

)

Income taxes

(2,548

)

7,470

Net cash provided by operating activities

20,218

15,281

Investing activities:

Purchases of property, plant and equipment

(6,177

)

(5,817

)

Settlement of net investment hedges

-

(958

)

Sales of businesses, net of cash retained

10,178

-

Other

(70

)

(233

)

Net cash provided by (used in) investing activities

3,931

(7,008

)

Financing activities:

Payment of dividends

(9,704

)

(9,690

)

Proceeds from issuance of common stock

1,684

683

Purchase of treasury stock

(5,121

)

(12,309

)

Income tax benefit from the exercise of stock options and deferred

compensation distribution, and other

400

456

Net cash used in financing activities

(12,741

)

(20,860

)

Effect of exchange rate changes on cash

4,001

(5,790

)

Net increase (decrease) in cash and cash equivalents

15,409

(18,377

)

Cash and cash equivalents, beginning of period

305,900

389,971

Cash and cash equivalents, end of period

$

321,309

$

371,594

Supplemental disclosures:

Cash paid during the period for: