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Brady Corporation
Quarter Ended
Sales for the quarter ended
Earnings from continuing operations for the quarter ended
Net earnings from continuing operations per Class A Nonvoting Common
Share were
Six-Month Period Ended
Sales for the six-month period ended
Earnings from continuing operations for the six-month period ended
Net earnings from continuing operations per Class A Nonvoting Common
share were
Commentary:
“This marks the fourth consecutive quarter of organic sales growth for
“Along with our stabilizing gross profit margins, we are also seeing
benefits from our focus on controlling selling, general, and
administrative expenses, which should aid in continuing our trend of
improving financial results,” said Brady’s Chief Financial Officer,
Fiscal 2015 Guidance:
The Company anticipates low single-digit organic sales growth in fiscal
2015, with organic sales growth in both the Identification Solutions and
Workplace Safety platforms. Brady also expects a full-year income tax
rate in the mid-to-upper 20 percent range, approximately
Earnings from continuing operations per diluted Class A Nonvoting Common
Share, exclusive of restructuring charges and other non-routine charges
guidance remains unchanged at
A webcast regarding Brady’s fiscal 2015 second quarter financial results
will be available at www.bradycorp.com
beginning at
* See accompanying notes for Non-GAAP measures.
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: implementation of the healthcare strategy;
implementation of the Workplace Safety strategy; future competition;
risks associated with restructuring plans; 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, healthcare and transportation; technology changes and
potential security violations to the Company's information technology
system; fluctuations in currency rates versus the U.S. dollar; risks
associated with international operations; difficulties associated with
exports; Brady's ability to develop and successfully market new
products; risks associated with identifying, completing, and integrating
acquisitions; 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; risk
associated with loss of key talent; risks associated with divestitures
and businesses held for sale; risks associated with obtaining
governmental approvals and maintaining regulatory compliance; risk
associated with product liability claims; environmental, health and
safety compliance costs and liabilities; potential write-offs of Brady's
substantial intangible assets; risks associated with our ownership
structure; unforeseen tax consequences; Brady's ability to maintain
compliance with its debt covenants; increase in our level of debt; 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 | ||||||||||||||||
CONSOLIDATED STATEMENTS OF EARNINGS | ||||||||||||||||
(Unaudited; Dollars in thousands, except per share data) | ||||||||||||||||
Three months ended January 31, | Six months ended January 31, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Net sales | $ | 282,628 | $ | 291,194 | $ | 592,868 | $ | 598,724 | ||||||||
Cost of products sold | 144,425 | 148,658 | 304,503 | 298,341 | ||||||||||||
Gross margin | 138,203 | 142,536 | 288,365 | 300,383 | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 8,948 | 8,440 | 18,579 | 17,027 | ||||||||||||
Selling, general and administrative | 107,565 | 111,426 | 216,846 | 224,159 | ||||||||||||
Restructuring charges | 4,879 | 4,324 | 9,157 | 11,163 | ||||||||||||
Total operating expenses | 121,392 | 124,190 | 244,582 | 252,349 | ||||||||||||
Operating income | 16,811 | 18,346 | 43,783 | 48,034 | ||||||||||||
Other income and (expense): | ||||||||||||||||
Investment and other income | 211 | 255 | 535 | 1,017 | ||||||||||||
Interest expense | (3,000 | ) | (3,676 | ) | (5,891 | ) | (7,397 | ) | ||||||||
Earnings from continuing operations before income taxes | 14,022 | 14,925 | 38,427 | 41,654 | ||||||||||||
Income tax expense | 2,438 | 4,408 | 11,344 | 13,002 | ||||||||||||
Earnings from continuing operations | $ | 11,584 | $ | 10,517 | $ | 27,083 | $ | 28,652 | ||||||||
Earnings (loss) from discontinued operations, net of income taxes | — | 5,907 | (1,915 | ) | 11,701 | |||||||||||
Net earnings | $ | 11,584 | $ | 16,424 | $ | 25,168 | $ | 40,353 | ||||||||
Earnings from continuing operations per Class A Nonvoting Common Share: | ||||||||||||||||
Basic | $ | 0.23 | $ | 0.20 | $ | 0.53 | $ | 0.55 | ||||||||
Diluted | $ | 0.23 | $ | 0.20 | $ | 0.53 | $ | 0.55 | ||||||||
Earnings from continuing operations per Class B Voting Common Share: | ||||||||||||||||
Basic | $ | 0.23 | $ | 0.20 | $ | 0.51 | $ | 0.53 | ||||||||
Diluted | $ | 0.23 | $ | 0.20 | $ | 0.51 | $ | 0.53 | ||||||||
Earnings (loss) from discontinued operations per Class A Nonvoting Common Share: | ||||||||||||||||
Basic | $ | — | $ | 0.11 | $ | (0.04 | ) | $ | 0.22 | |||||||
Diluted | $ | — | $ | 0.11 | $ | (0.04 | ) | $ | 0.22 | |||||||
Earnings (loss) from discontinued operations per Class B Voting Common Share: | ||||||||||||||||
Basic | $ | — | $ | 0.11 | $ | (0.03 | ) | $ | 0.23 | |||||||
Diluted | $ | — | $ | 0.11 | $ | (0.04 | ) | $ | 0.22 | |||||||
Net earnings per Class A Nonvoting Common Share: | ||||||||||||||||
Basic | $ | 0.23 | $ | 0.31 | $ | 0.49 | $ | 0.77 | ||||||||
Diluted | $ | 0.23 | $ | 0.31 | $ | 0.49 | $ | 0.77 | ||||||||
Dividends | $ | 0.20 | $ | 0.195 | $ | 0.40 | $ | 0.39 | ||||||||
Net earnings per Class B Voting Common Share: | ||||||||||||||||
Basic | $ | 0.23 | $ | 0.31 | $ | 0.48 | $ | 0.76 | ||||||||
Diluted | $ | 0.23 | $ | 0.31 | $ | 0.47 | $ | 0.75 | ||||||||
Dividends | $ | 0.20 | $ | 0.195 | $ | 0.383 | $ | 0.373 | ||||||||
Weighted average common shares outstanding (in thousands): | ||||||||||||||||
Basic | 51,272 | 52,208 | 51,262 | 52,140 | ||||||||||||
Diluted | 51,348 | 52,494 | 51,330 | 52,457 |
BRADY CORPORATION AND SUBSIDIARIES | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
(Unaudited; Dollars in thousands) | ||||||||
January 31, 2015 | July 31, 2014 | |||||||
ASSETS |
||||||||
Current assets: | ||||||||
Cash and cash equivalents |
$ | 93,299 | $ | 81,834 | ||||
Accounts receivable—net | 151,426 | 177,648 | ||||||
Inventories: | ||||||||
Finished products | 70,974 | 73,096 | ||||||
Work-in-process | 19,315 | 17,689 | ||||||
Raw materials and supplies | 26,649 | 22,490 | ||||||
Total inventories | 116,938 | 113,275 | ||||||
Assets held for sale | — | 49,542 | ||||||
Prepaid expenses and other current assets | 43,953 | 41,543 | ||||||
Total current assets | 405,616 | 463,842 | ||||||
Other assets: | ||||||||
Goodwill | 478,991 | 515,004 | ||||||
Other intangible assets | 81,526 | 91,014 | ||||||
Deferred income taxes | 19,293 | 27,320 | ||||||
Other | 20,775 | 22,314 | ||||||
Property, plant and equipment: | ||||||||
Cost: | ||||||||
Land | 5,924 | 7,875 | ||||||
Buildings and improvements | 97,729 | 101,866 | ||||||
Machinery and equipment | 283,773 | 288,409 | ||||||
Construction in progress | 8,508 | 12,500 | ||||||
395,934 | 410,650 | |||||||
Less accumulated depreciation | 266,680 | 276,479 | ||||||
Property, plant and equipment—net | 129,254 | 134,171 | ||||||
Total | $ | 1,135,455 | $ | 1,253,665 | ||||
LIABILITIES AND STOCKHOLDERS’ INVESTMENT |
||||||||
Current liabilities: | ||||||||
Notes payable | $ | 90,850 | $ | 61,422 | ||||
Accounts payable | 74,154 | 88,099 | ||||||
Wages and amounts withheld from employees | 32,535 | 38,064 | ||||||
Liabilities held for sale | — | 10,640 | ||||||
Taxes, other than income taxes | 5,928 | 7,994 | ||||||
Accrued income taxes | 1,549 | 7,893 | ||||||
Other current liabilities | 32,935 | 35,319 | ||||||
Current maturities on long-term debt | 42,514 | 42,514 | ||||||
Total current liabilities | 280,465 | 291,945 | ||||||
Long-term obligations, less current maturities | 143,778 | 159,296 | ||||||
Other liabilities | 65,652 | 69,348 | ||||||
Total liabilities | 489,895 | 520,589 | ||||||
Stockholders’ investment: | ||||||||
Common stock: | ||||||||
Class A nonvoting common stock—Issued 51,261,487 and 51,261,487 shares, respectively and outstanding 47,748,984 and 47,704,196 shares, respectively | 513 | 513 | ||||||
Class B voting common stock—Issued and outstanding, 3,538,628 shares | 35 | 35 | ||||||
Additional paid-in capital | 312,819 | 311,811 | ||||||
Earnings retained in the business | 456,777 | 452,057 | ||||||
Treasury stock—3,512,503 and 3,477,291 shares, respectively of Class
A nonvoting
common stock, at cost |
(94,089 | ) | (93,337 | ) | ||||
Accumulated other comprehensive (loss) income | (27,569 | ) | 64,156 | |||||
Other | (2,926 | ) | (2,159 | ) | ||||
Total stockholders’ investment | 645,560 | 733,076 | ||||||
Total | $ | 1,135,455 | $ | 1,253,665 |
BRADY CORPORATION AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Unaudited; Dollars in thousands) | ||||||||
Six months ended January 31, | ||||||||
2015 | 2014 | |||||||
Operating activities: | ||||||||
Net earnings | $ | 25,168 | $ | 40,353 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 20,066 | 22,342 | ||||||
Non-cash portion of stock-based compensation expense | 2,471 | 4,377 | ||||||
Non-cash portion of restructuring charges | 896 | 97 | ||||||
Loss on sale of business, net | 426 | — | ||||||
Deferred income taxes | (781 | ) | (2,402 | ) | ||||
Changes in operating assets and liabilities (net of effects of business acquisitions/divestitures): | ||||||||
Accounts receivable | 10,918 | (1,418 | ) | |||||
Inventories | (10,840 | ) | (8,754 | ) | ||||
Prepaid expenses and other assets | (3,053 | ) | (3,505 | ) | ||||
Accounts payable and accrued liabilities | (15,423 | ) | (7,263 | ) | ||||
Income taxes | (5,918 | ) | (2,050 | ) | ||||
Net cash provided by operating activities | 23,930 | 41,777 | ||||||
Investing activities: | ||||||||
Purchases of property, plant and equipment | (17,808 | ) | (17,607 | ) | ||||
Sale of business, net of cash retained | 6,111 | — | ||||||
Other | 4,173 | 89 | ||||||
Net cash used in investing activities | (7,524 | ) | (17,518 | ) | ||||
Financing activities: | ||||||||
Payment of dividends | (20,449 | ) | (20,370 | ) | ||||
Proceeds from issuance of common stock | 847 | 10,894 | ||||||
Proceeds from borrowing on notes payable | 47,818 | 3,187 | ||||||
Repayment of borrowing on notes payable | (18,390 | ) | (30,000 | ) | ||||
Income tax on the exercise of stock options and deferred compensation distributions, and other | (3,830 | ) | (984 | ) | ||||
Net cash provided by (used in) financing activities | 5,996 | (37,273 | ) | |||||
Effect of exchange rate changes on cash | (10,937 | ) | 1,072 | |||||
Net increase (decrease) in cash and cash equivalents | 11,465 | (11,942 | ) | |||||
Cash and cash equivalents, beginning of period | 81,834 | 91,058 | ||||||
Cash and cash equivalents, end of period | $ | 93,299 | $ | 79,116 | ||||
Supplemental disclosures: | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 6,146 | $ | 7,283 | ||||
Income taxes, net of refunds | 15,727 | 14,083 |
BRADY CORPORATION AND SUBSIDIARIES | ||||||||||||||||
SEGMENT INFORMATION | ||||||||||||||||
(Unaudited; Dollars in thousands) | ||||||||||||||||
Three Months Ended January 31, | Six Months Ended January 31, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
SALES TO EXTERNAL CUSTOMERS | ||||||||||||||||
ID Solutions | $ | 192,065 | $ | 194,732 | $ | 404,162 | $ | 404,278 | ||||||||
Workplace Safety | 90,563 | 96,462 | 188,706 | 194,446 | ||||||||||||
Total | $ | 282,628 | $ | 291,194 | $ | 592,868 | $ | 598,724 | ||||||||
SALES INFORMATION | ||||||||||||||||
ID Solutions | ||||||||||||||||
Organic |
1.9 | % | 2.5 | % | 2.1 | % | 2.9 | % | ||||||||
Currency | (3.3 | )% | (0.5 | )% | (2.1 | )% | (0.4 | )% | ||||||||
Acquisitions | — | % | 13.8 | % | — | % | 19.8 | % | ||||||||
Total | (1.4 | )% | 15.8 | % | — | % | 22.3 | % | ||||||||
Workplace Safety | ||||||||||||||||
Organic | 0.6 | % | (6.8 | )% | 1.5 | % | (8.4 | )% | ||||||||
Currency | (6.7 | )% | (0.9 | )% | (4.5 | )% | (0.8 | )% | ||||||||
Acquisitions | — | % | — | % | — | % | — | % | ||||||||
Total | (6.1 | )% | (7.7 | )% | (3.0 | )% | (9.2 | )% | ||||||||
Total Company | ||||||||||||||||
Organic | 1.4 | % | (1.1 | )% | 1.9 | % | (1.6 | )% | ||||||||
Currency | (4.3 | )% | (0.6 | )% | (2.9 | )% | (0.5 | )% | ||||||||
Acquisitions | — | % | 8.5 | % | — | % | 12.0 | % | ||||||||
Total | (2.9 | )% | 6.8 | % | (1.0 | )% | 9.9 | % | ||||||||
SEGMENT PROFIT | ||||||||||||||||
ID Solutions | $ | 35,719 | $ | 37,526 | $ | 79,186 | $ | 88,493 | ||||||||
Workplace Safety | 12,776 | 14,668 | 28,315 | 33,042 | ||||||||||||
Total | $ | 48,495 | $ | 52,194 | $ | 107,501 | $ | 121,535 | ||||||||
SEGMENT PROFIT AS A PERCENT OF SALES | ||||||||||||||||
ID Solutions | 18.6 | % | 19.3 | % | 19.6 | % | 21.9 | % | ||||||||
Workplace Safety | 14.1 | % | 15.2 | % | 15.0 | % | 17.0 | % | ||||||||
Total | 17.2 | % | 17.9 | % | 18.1 | % | 20.3 | % | ||||||||
Three Months Ended January 31, | Six Months Ended January 31, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Total segment profit | $ | 48,495 | $ | 52,194 | $ | 107,501 | $ | 121,535 | ||||||||
Unallocated amounts: | ||||||||||||||||
Administrative costs | (26,805 | ) | (29,524 | ) | (54,561 | ) | (62,338 | ) | ||||||||
Restructuring charges | (4,879 | ) | (4,324 | ) | (9,157 | ) | (11,163 | ) | ||||||||
Investment and other income | 211 | 255 | 535 | 1,017 | ||||||||||||
Interest expense | (3,000 | ) | (3,676 | ) | (5,891 | ) | (7,397 | ) | ||||||||
Earnings from continuing operations before income taxes | $ | 14,022 | $ | 14,925 | $ | 38,427 | $ | 41,654 |
GAAP to NON-GAAP MEASURES | ||||||||||||||||
(Unaudited; 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. | ||||||||||||||||
Earnings from Continuing Operations Before Income Taxes Excluding Certain Items: | ||||||||||||||||
Brady is presenting the Non-GAAP measure "Earnings from Continuing Operations Before Income Taxes Excluding Certain Items." This is not a calculation based upon GAAP. The amounts included in this Non-GAAP measure are derived from amounts included in the Consolidated Financial Statements and supporting footnote disclosures. We do not view these items to be part of our sustainable results. We believe this profit measure provides an important perspective of underlying business trends and results and provides a more comparable measure from year to year. The table below provides a reconciliation of Earnings from Continuing Operations Before Income Taxes to Earnings from Continuing Operations Before Income Taxes Excluding Certain Items: | ||||||||||||||||
Three Months Ended January 31, | Six Months Ended January 31, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Earnings from Continuing Operations Before Income Taxes (GAAP measure) | $ | 14,022 | $ | 14,925 | $ | 38,427 | $ | 41,654 | ||||||||
Restructuring charges | 4,879 | 4,324 | 9,157 | 11,163 | ||||||||||||
|
||||||||||||||||
Earnings from Continuing Operations Before Income Taxes Excluding Certain Items (non-GAAP measure) |
$ | 18,901 | $ | 19,249 | $ | 47,584 | $ | 52,817 | ||||||||
Income Taxes on Continuing Operations Excluding Certain Items: | ||||||||||||||||
Brady is presenting the Non-GAAP measure "Income Taxes on Continuing Operations Excluding Certain Items." This is not a calculation based upon GAAP. The amounts included in this Non-GAAP measure are derived from amounts included in the Consolidated Financial Statements and supporting footnote disclosures. We do not view these items to be part of our sustainable results. We believe this measure provides an important perspective of underlying business trends and results and provides a more comparable measure from year to year. The table below provides a reconciliation of Income Taxes on Continuing Operations to Income Taxes on Continuing Operations Excluding Certain Items: | ||||||||||||||||
Three Months Ended January 31, | Six Months Ended January 31, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Income Taxes on Continuing Operations (GAAP measure) | $ | 2,438 | $ | 4,408 | $ | 11,344 | $ | 13,002 | ||||||||
Restructuring charges | 1,434 | 1,481 | 2,770 | 3,611 | ||||||||||||
|
||||||||||||||||
Income Taxes on Continuing Operations Excluding Certain Items (non-GAAP measure) |
$ | 3,872 | $ | 5,889 | $ | 14,114 | $ | 16,613 | ||||||||
Net Earnings from Continuing Operations Excluding Certain Items: | ||||||||||||||||
Brady is presenting the Non-GAAP measure "Net Earnings from Continuing Operations Excluding Certain Items." This is not a calculation based upon GAAP. The amounts included in this Non-GAAP measure are derived from amounts included in the Consolidated Financial Statements and supporting footnote disclosures. We do not view these items to be part of our sustainable results. We believe this measure provides an important perspective of underlying business trends and results and provides a more comparable measure from year to year. The table below provides a reconciliation of Net Earnings from Continuing Operations to Net Earnings from Continuing Operations Excluding Certain Items: | ||||||||||||||||
Three Months Ended January 31, | Six Months Ended January 31, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Net Earnings from Continuing Operations (GAAP measure) | $ | 11,584 | $ | 10,517 | $ | 27,083 | $ | 28,652 | ||||||||
Restructuring charges | 3,445 | 2,843 | 6,387 | 7,552 | ||||||||||||
|
||||||||||||||||
Net Earnings from Continuing Operations Excluding Certain Items (non-GAAP measure) |
$ | 15,029 | $ | 13,360 | $ | 33,470 | $ | 36,204 | ||||||||
Net Earnings from Continuing Operations Per Diluted Class A Nonvoting Common Share Excluding Certain Items: | ||||||||||||||||
Brady is presenting the Non-GAAP measure "Net Earnings from Continuing Operations Per Diluted Class A Nonvoting Common Share Excluding Certain Items." This is not a calculation based upon GAAP. The amounts included in this Non-GAAP measure are derived from amounts included in the Consolidated Financial Statements. We do not view these items to be part of our sustainable results. We believe this measure provides an important perspective of underlying business trends and results and provides a more comparable measure from year to year. The table below provides a reconciliation of Net Earnings from Continuing Operations Per Diluted Class A Nonvoting Common Share to Net Earnings from Continuing Operations Per Diluted Class A Nonvoting Common Share Excluding Certain Items: | ||||||||||||||||
Three Months Ended January 31, | Six Months Ended January 31, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Net Earnings from Continuing Operations Per Diluted Class A Nonvoting Common Share (GAAP measure) |
$ | 0.23 | $ | 0.20 | $ | 0.53 | $ | 0.55 | ||||||||
Restructuring charges | 0.07 | 0.05 | 0.12 | 0.14 | ||||||||||||
|
||||||||||||||||
Net Earnings from Continuing Operations Per Diluted Class A Nonvoting Common Share Excluding Certain Items (non-GAAP measure) |
$ | 0.29 | $ | 0.25 | $ | 0.65 | $ | 0.69 |
Source:
Brady Corporation
Investor contact:
Ann Thornton, 414-438-6887
or
Media
contact:
Carole Herbstreit, 414-438-6882