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Brady Corporation
Quarter Ended
Sales for the fiscal 2013 first quarter ended
Net income in the fiscal 2013 first quarter was down 16.9 percent to
Earnings per diluted Class A Common Share were down 14.5 percent to
Commentary and Guidance:
“I am pleased with our performance in the quarter as our business in the
“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
A webcast regarding Brady’s fiscal 2013 first quarter financial results
will be available at www.bradycorp.com
beginning 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
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: | ||||||||
Interest, net of capitalized interest | $ | 4,953 | $ | 6,082 | ||||
Income taxes, net of refunds | 12,199 | 5,825 |
Information by regional segment for the three months ended October 31, 2012 and 2011 is as follows: | ||||||||||||||||||||||||
(in thousands) | Americas | EMEA | Asia-Pacific | Total Region |
Corporate |
Total | ||||||||||||||||||
SALES TO EXTERNAL CUSTOMERS | ||||||||||||||||||||||||
Three months ended: | ||||||||||||||||||||||||
October 31, 2012 | $ | 148,692 | $ | 93,233 | $ | 95,721 | $ | 337,646 | - | $ | 337,646 | |||||||||||||
October 31, 2011 | $ | 153,863 | $ | 97,356 | $ | 98,289 | $ | 349,508 | - | $ | 349,508 | |||||||||||||
SALES GROWTH INFORMATION | ||||||||||||||||||||||||
Three months ended October 31, 2012: | ||||||||||||||||||||||||
Base | -0.7 | % | -3.2 | % | -2.5 | % | -1.9 | % | - | -1.9 | % | |||||||||||||
Currency | -1.1 | % | -5.7 | % | -0.1 | % | -2.1 | % | - | -2.1 | % | |||||||||||||
Acquisitions/Divestitures | -1.6 | % | 4.7 | % | 0.0 | % | 0.6 | % | - | 0.6 | % | |||||||||||||
Total | -3.4 | % | -4.2 | % | -2.6 | % | -3.4 | % | - | -3.4 | % | |||||||||||||
Three months ended October 31, 2011: | ||||||||||||||||||||||||
Base | 5.7 | % | 3.7 | % | -0.2 | % | 3.5 | % | - | 3.5 | % | |||||||||||||
Currency | 0.4 | % | 3.7 | % | 5.5 | % | 2.7 | % | - | 2.7 | % | |||||||||||||
Acquisitions/Divestitures | -0.7 | % | -1.6 | % | 2.1 | % | -0.2 | % | - | -0.2 | % | |||||||||||||
Total | 5.4 | % | 5.8 | % | 7.4 | % | 6.0 | % | - | 6.0 | % | |||||||||||||
SEGMENT PROFIT (LOSS) | ||||||||||||||||||||||||
Three months ended: | ||||||||||||||||||||||||
October 31, 2012 | $ | 44,633 | $ | 23,567 | $ | 12,055 | $ | 80,255 | $ | (1,973 | ) | $ | 78,282 | |||||||||||
October 31, 2011 | $ | 43,230 | $ | 26,299 | $ | 13,304 | $ | 82,833 | $ | (3,263 | ) | $ | 79,570 | |||||||||||
Percentage increase (decrease) | 3.2 | % | -10.4 | % | -9.4 | % | -3.1 | % | -1.6 | % | ||||||||||||||
NET INCOME RECONCILIATION (in thousands) | ||||||||||||||||||||||||
Three months ended: | ||||||||||||||||||||||||
October 31, | October 31, | |||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||
Total profit for reportable segments | $ | 80,255 | $ | 82,833 | ||||||||||||||||||||
Corporate and eliminations | (1,973 | ) | (3,263 | ) | ||||||||||||||||||||
Unallocated amounts: | ||||||||||||||||||||||||
Administrative costs | (30,408 | ) | (30,480 | ) | ||||||||||||||||||||
Loss (gain) on sales of businesses | (3,438 | ) | - | |||||||||||||||||||||
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 |
NON-GAAP MEASURES | ||
(Dollars in Thousands, Except Per Share Amounts) | ||
In accordance with the U.S. Securities and Exchange Commission’s Regulation G, the following provides definitions of the non-GAAP measures used in the earnings release and the reconciliation to the most closely related GAAP measure. | ||
EBITDA: | ||
Brady is presenting EBITDA because it is used by many of our investors and lenders, and is presented as a convenience to them. EBITDA represents net income before interest expense, income taxes, depreciation and amortization. EBITDA is not a calculation based on generally accepted accounting principles ("GAAP"). The amounts included in the EBITDA calculation, however, are derived from amounts included in the Condensed Consolidated Statements of Income data. EBITDA should not be considered as an alternative to net income or operating income as an indicator of the Company's operating performance, or as an alternative to operating cash flows as a measure of liquidity. The EBITDA measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation. |
Fiscal 2013 | |||||||||||||||||||
Q1 |
Q2 |
Q3 |
Q4 |
Total |
|||||||||||||||
EBITDA: | |||||||||||||||||||
Net income | $ | 27,188 | $ | - | $ | - | $ | - | $ | 27,188 | |||||||||
Interest expense | 4,163 | - | - | - | 4,163 | ||||||||||||||
Income taxes | 13,482 | - | - | - | 13,482 | ||||||||||||||
Depreciation and amortization | 10,675 | - | - | - | 10,675 | ||||||||||||||
EBITDA (non-GAAP measure) | $ | 55,508 | $ | - | $ | - | $ | - | $ | 55,508 | |||||||||
Fiscal 2012 | |||||||||||||||||||
Q1 |
Q2 |
Q3 |
Q4 |
Total |
|||||||||||||||
EBITDA: | |||||||||||||||||||
Net income (loss) | $ | 32,732 | $ | (89,954 | ) | $ | 27,652 | $ | 11,659 | $ | (17,911 | ) | |||||||
Interest expense | 5,047 | 4,933 | 4,735 | 4,375 | 19,090 | ||||||||||||||
Income taxes | 11,109 | 8,635 | 9,676 | 11,241 | 40,661 | ||||||||||||||
Depreciation and amortization | 11,241 | 10,935 | 10,745 | 11,066 | 43,987 | ||||||||||||||
Impairment charge | - | 115,688 | - | - | 115,688 | ||||||||||||||
EBITDA (non-GAAP measure) | $ | 60,129 | $ | 50,237 | $ | 52,808 | $ | 38,341 | $ | 201,515 |
Diluted Earnings Per Share Excluding Losses on the Sales of Businesses: |
This is a measure of the Company’s diluted net earnings per share excluding current year losses on the sales of businesses. We do not view these items to be part of our sustainable results. We believe this earnings per share measure provides an important perspective of underlying business trends and results and provides a more comparable measure of year-on-year earnings per share growth. The table below provides a reconciliation of diluted earnings per share to diluted earnings per share excluding losses on the sales of businesses: |
Three Months Ended | ||||||||
October 31, | ||||||||
2012 | 2011 | |||||||
Diluted Earnings per Share | $ | 0.53 | $ | 0.62 | ||||
Loss on the sale of Brady Medical | 0.05 | - | ||||||
Loss on the sale of Varitronics | 0.01 | - | ||||||
Diluted Earnings per Share Excluding | ||||||||
Losses on the Sales of Businesses | $ | 0.59 | $ | 0.62 |
All reconciling items are presented net of tax. Tax effects are calculated consistent with the nature of the underlying transaction. | |
Net Income Excluding Losses on the Sales of Businesses: | |
This is a measure of the Company’s net income excluding current year losses on the sales of businesses. We do not view these items to be part of our sustainable results. We believe this net income measure provides an important perspective of underlying business trends and results and provides a more comparable measure of year-on-year net income growth. The table below provides a reconciliation of net income to net income excluding the losses on the sales of businesses: |
Three Months Ended | ||||||||
October 31, | ||||||||
2012 | 2011 | |||||||
Net Income | $ | 27,188 | $ | 32,732 | ||||
Loss on the sale of Brady Medical | 2,577 | - | ||||||
Loss on the sale of Varitronics | 638 | - | ||||||
Net Income Excluding | ||||||||
Losses on the Sales of Businesses | $ | 30,403 | $ | 32,732 |
All reconciling items are presented net of tax. Tax effects are calculated consistent with the nature of the underlying transaction. |
Source:
Brady Corporation
Investor contact:
Aaron Pearce, 414-438-6895
or
Media
contact:
Carole Herbstreit, 414-438-6882