Brady Corporation Reports Fiscal 2013 Third Quarter Results

Brady Corporation Reports Fiscal 2013 Third Quarter Results

MILWAUKEE--(BUSINESS WIRE)-- Brady Corporation (NYS: BRC) ("Brady"), a world leader in identification solutions, today reported its financial results for the fiscal 2013 third quarter ended April 30, 2013.

Quarter Ended April 30, 2013 Financial Results:


The company continued its portfolio realignment process by announcing plans to sell its Asia-based Die-Cut business which was outlined in a separate press release on May 16, 2013. Accordingly, the company has recast its financial statements to report the financial results of the Die-Cut business on one line item in the accompanying condensed consolidated statements of income.

Sales from continuing operations for the fiscal 2013 third quarter were up 11.0 percent to $305.7 million compared to $275.4 million in the third quarter of fiscal 2012. Organic sales were down 4.7 percent, acquisitions added 16.8 percent, and the impact of foreign currency translation decreased sales by 1.1 percent. By segment, organic sales decreased 2.9 percent in the Americas, 4.8 percent in EMEA and 11.6 percent in the Asia-Pacific region.

Net earnings from continuing operations in the fiscal 2013 third quarter were $21.8 million compared to $28.0 million in the same quarter last year. Non-GAAP net earnings from continuing operations* were $28.7 million in the third quarter of fiscal 2013, compared to $29.9 million in the third quarter of fiscal 2012.

Earnings from continuing operations per diluted Class A Nonvoting Common Share were $0.42 in the third quarter of fiscal 2013 compared to $0.53 in the same quarter last year. Non-GAAP earnings from continuing operations per diluted Class A Nonvoting Common Share* were $0.55 in the third quarter of fiscal 2013, compared to $0.56 in the same quarter of fiscal 2012.

Nine Months Ended April 30, 2013 Financial Results:

Sales for the nine-month period ended April 30, 2013 were up 5.3 percent to $856.4 million compared to $813.6 million in the same period last year. Organic sales were down 2.7 percent, acquisitions added 9.3 percent to sales and the impact of foreign currency translation decreased sales by 1.3 percent. By segment, organic sales decreased 0.7 percent in the Americas, 4.2 percent in EMEA and 6.8 percent in the Asia-Pacific region.

Net earnings from continuing operations for the nine-month period ended April 30, 2013 were $37.7 million compared to $84.3 million in the same period in fiscal 2012. Non-GAAP net earnings from continuing operations* were $75.1 million in the nine-month period ended April 30, 2013 compared to $86.1 million in the same period of fiscal 2012.

Earnings from continuing operations per diluted Class A Nonvoting Common Share were $0.73 for the nine-month period ended April 30, 2013 compared to $1.59 in the same period of fiscal 2012. Non-GAAP earnings from continuing operations per diluted Class A Nonvoting Common Share* were $1.45 for the nine-month period ended April 30, 2013, compared to $1.62 in the same period of fiscal 2012.

Commentary and Guidance:

"In the face of a challenging economy, we continue to position Brady for long-term success by optimizing our portfolio of businesses, aligning our organization with growth opportunities and reducing our infrastructure costs. This morning we announced our intention to sell our Die-Cut business which will continue the process of portfolio realignment as we have already divested three businesses and acquired Precision Dynamics Corporation, a business serving the healthcare space. These portfolio adjustments will allow us to focus more on our continuing businesses of Identification Solutions and Workplace Safety," stated Brady's President and Chief Executive Officer, Frank M. Jaehnert. "As part of our previously announced strategy to improve organic growth and profitability, effective May 1, 2013, we are changing our organizational structure from geographically-based to an organization structured around global business platforms. We are also targeting expansion in faster-growing geographies such as Central Europe, the Middle East, Africa and selected markets in Asia; and focusing on industries such as food and beverage, chemical, oil, and gas and healthcare.

"In addition to improving organic growth, we believe that our reorganization around global business platforms will yield approximately $25 million to $30 million of annual pre-tax savings, approximately half of which will be reinvested into growth initiatives. We also continue to review our facility footprint and believe that we have further opportunities for rationalization as we move forward with our business reorganization and simplification."

Brady's Chief Financial Officer, Thomas J. Felmer said, "Our balance sheet remains strong. Having repaid much of the debt incurred to finance the PDC acquisition, Brady is in a solid financial position to fund future organic and inorganic growth opportunities. We expect earnings from continuing operations per diluted Class A Nonvoting Common Share to range from between $0.45 and $0.55, exclusive of restructuring charges and certain other items during our fiscal 2013 fourth quarter ending July 31, 2013."

A webcast regarding Brady's fiscal 2013 third 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, 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 January 31, 2013 employed approximately 8,200 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.

* See accompanying notes for Non-GAAP measures.

Brady believes that certain statements in this news release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements related to future, not past, events included in this news release, including, without limitation, statements regarding Brady'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 are forward-looking statements. When used in this news release, 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; future financial performance of major markets Brady serves, which include, without limitation, telecommunications, manufacturing, electrical, construction, laboratory, education, governmental, public utility, computer, transportation; difficulties in making and integrating acquisitions; risks associated with newly acquired businesses; Brady's ability to develop and successfully market new products; changes in the supply of, or price for, parts and components; increased price pressure from suppliers and customers; fluctuations in currency rates versus the US dollar; unforeseen tax consequences; potential write-offs of Brady's substantial intangible assets; Brady's ability to retain significant contracts and customers; risks associated with international operations; Brady's ability to maintain compliance with its debt covenants; technology changes; business interruptions due to implementing business systems; environmental, health and safety compliance costs and liabilities; future competition; interruptions to sources of supply; Brady's ability to realize cost savings from operating initiatives; difficulties associated with exports; risks associated with restructuring plans; risks associated with obtaining governmental approvals and maintaining regulatory compliance; 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 located in 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.

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in Thousands, Except Per Share Data)

(Unaudited)

(Unaudited)

Three Months Ended April 30,

Nine Months Ended April 30,

2013

2012

2013

2012

Net sales

$

305,737

$

275,388

$

856,408

$

813,573

Cost of products sold

146,031

123,641

403,888

367,330

Gross margin

159,706

151,747

452,520

446,243

Operating expenses:

Research and development

8,062

8,200

24,162

25,657

Selling, general and administrative

112,148

98,614

321,909

293,518

Restructuring charges

8,540

1,977

10,487

1,977

Total operating expenses

128,750

108,791

356,558

321,152

Operating income

30,956

42,956

95,962

125,091

Other income and (expense):

Investment and other income

1,131

1,108

2,427

1,719

Interest expense

(4,185

)

(4,735

)

(12,755

)

(14,715

)

Earnings from continuing operations before income taxes

27,902

39,329

85,634

112,095

Income taxes

6,064

11,290

47,965

27,767

Net earnings from continuing operations

$

21,838

$

28,039

$

37,669

$

84,328

(Loss) from discontinued operations, net of income taxes

(17,605

)

(387

)

(14,933

)

(113,898

)

Net earnings (loss)

$

4,233

$

27,652

$

22,736

$

(29,570

)

Earnings from continuing operations per Class A Nonvoting Common Share:

Basic

$

0.42

$

0.53

$

0.73

$

1.60

Diluted

$

0.42

$

0.53

$

0.73

$

1.59

Earnings from continuing operations per Class B Voting Common Share:

Basic

$

0.42

$

0.53

$

0.72

$

1.59

Diluted

$

0.42

$

0.53

$

0.71

$

1.57

(Loss) from discontinued operations per Class A Nonvoting Common Share:

Basic

$

(0.34

)

$

$

(0.29

)

$

(2.17

)

Diluted

$

(0.34

)

$

(0.01

)

$

(0.29

)

$

(2.16

)

(Loss) from discontinued operations per Class B Voting Common Share:

Basic

$

(0.34

)

$

$

(0.30

)

$

(2.17

)

Diluted

$

(0.34

)

$

(0.01

)

$

(0.29

)

$

(2.15

)

Earnings per Class A Nonvoting Common Share:

Basic

$

0.08

$

0.53

$

0.44

$

(0.57

)

Diluted

$

0.08

$

0.52

$

0.44

$

(0.57

)

Dividends

$

0.19

$

0.185

$

0.57

$

0.555

Earnings per Class B Voting Common Share:

Basic

$

0.08

$

0.53

$

0.42

$

(0.58

)

Diluted

$

0.08

$

0.52

$

0.42

$

(0.58

)

Dividends

$

0.19

$

0.185

$

0.553

$

0.538

Weighted average common shares outstanding (in thousands):

Basic

51,415

52,513

51,210

52,539

Diluted

52,041

53,003

51,685

52,946

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

(Unaudited)

April 30, 2013

July 31, 2012

ASSETS

Current assets:

Cash and cash equivalents

$

77,034

$

305,900

Accounts receivable—net

177,343

199,006

Inventories:

Finished products

62,995

64,740

Work-in-process

14,908

15,377

Raw materials and supplies

21,703

25,407

Total inventories

99,606

105,524

Assets held for sale

108,623

Prepaid expenses and other current assets

41,461

40,424

Total current assets

504,067

650,854

Other assets:

Goodwill

841,449

676,791

Other intangible assets

174,583

84,119

Deferred income taxes

6,305

45,356

Other

20,915

20,584

Property, plant and equipment:

Cost:

Land

9,081

8,651

Buildings and improvements

100,504

101,962

Machinery and equipment

278,233

292,130

Construction in progress

9,358

10,417

397,176

413,160

Less accumulated depreciation

263,527

283,145

Property, plant and equipment—net

133,649

130,015

Total

$

1,680,968

$

1,607,719

LIABILITIES AND STOCKHOLDERS' INVESTMENT

Current liabilities:

Notes payable

$

58,658

$

Accounts payable

75,204

86,646

Wages and amounts withheld from employees

36,840

54,629

Liabilities held for sale

34,684

Taxes, other than income taxes

7,603

9,307

Accrued income taxes

10,650

14,357

Other current liabilities

34,396

40,815

Current maturities on long-term debt

61,265

61,264

Total current liabilities

319,3