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News

Brady Corporation Reports Fiscal 2015 Third Quarter Results

Third quarter organic revenue growth of 1.7 percent.
Non-GAAP earnings from continuing operations per diluted Class A Nonvoting Common Share* of $0.34 in the third quarter of fiscal 2015 compared to $0.43 in the same quarter of the prior year.
Net cash provided by operating activities of $28.8 million or 167 percent of net income.

MILWAUKEE--(BUSINESS WIRE)--May 21, 2015-- Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2015 third quarter ended April 30, 2015.

Quarter Ended April 30, 2015 Financial Results:

Sales for the quarter ended April 30, 2015 decreased 6.3 percent to $290.2 million compared to $309.6 million in the third quarter of fiscal 2014. Total organic sales increased 1.7 percent and foreign currency translation decreased sales by 8.0 percent. By segment, organic sales increased 3.0 percent in Identification Solutions and decreased 1.1 percent in Workplace Safety.

Earnings from continuing operations for the quarter ended April 30, 2015 were $17.2 million compared to $20.2 million in the same quarter last year. Non-GAAP earnings from continuing operations* for the current quarter were $17.6 million compared to $22.3 million in the third quarter of fiscal 2014.

Earnings from continuing operations per diluted Class A Nonvoting Common Share were $0.33 for the quarter ended April 30, 2015 compared to $0.39 in the same quarter last year. Non-GAAP earnings from continuing operations per diluted Class A Nonvoting Common Share* for the current quarter were $0.34 compared to $0.43 per share in the third quarter of fiscal 2014.

The Company recorded a gain of $2.8 million, net of tax during the quarter ended April 30, 2015 due to the curtailment of a medical defined benefit plan. This gain is excluded from the reported Non-GAAP earnings from continuing operations* and Non-GAAP earnings from continuing operations per diluted Class A Nonvoting Common Share* for the quarter ended April 30, 2015.

Nine-Month Period Ended April 30, 2015 Financial Results:

Sales for the nine-month period ended April 30, 2015 decreased 2.8 percent to $883.1 million compared to $908.3 million in the same period in fiscal 2014. Total organic sales increased 1.8 percent and the impact of foreign currency translation decreased sales by 4.6 percent. By segment, organic sales increased 2.4 percent in Identification Solutions and increased 0.6 percent in Workplace Safety.

Earnings from continuing operations for the nine-month period ended April 30, 2015 were $44.3 million compared to $48.8 million in the same period in fiscal 2014. Non-GAAP earnings from continuing operations* for the nine-month period were $51.1 million compared to $58.5 million in the same period in fiscal 2014.

Earnings from continuing operations per diluted Class A Nonvoting Common share were $0.86 for the nine-month period ended April 30, 2015 compared to $0.93 in the same period in fiscal 2014. Non-GAAP earnings from continuing operations per diluted Class A Common Share* were $0.99 in the nine-month period ended April 30, 2015 compared to $1.12 in the same period in fiscal 2014.

Commentary and Guidance:

“After just over nine months with Brady, I’m impressed with the dedication of our team as well as the progress we’ve made on our initiatives this fiscal year,” said Brady President and Chief Executive Officer J. Michael Nauman. “I’m confident that we are investing in the right initiatives to deliver shareholder value over the long term. However, we still remain challenged by operational inefficiencies stemming from certain facilities that were recently consolidated, and we are focused on executing business fundamentals to drive organic sales and improve profitability while still achieving efficiency gains over the long term. We are investing in research and development and sales resources in selected industries, as well as building an improved, scalable digital platform that will generate value for Brady and enhance our customer experience.”

“We are focused on controlling non-customer facing selling, general and administrative expenses and driving cash flow improvements. Net cash provided by operating activities was $28.8 million during the quarter ended April 30, 2015, up from $5.3 million during the previous quarter ended January 31, 2015,” said Brady’s Chief Financial Officer Aaron Pearce. “As a result of our customer service and operational challenges due to the facility consolidations as well as less than originally anticipated organic sales in our Workplace Safety business, we do not anticipate our fourth quarter financial results to significantly improve over what we experienced in the third quarter. As such, we expect Non-GAAP earnings from continuing operations per diluted Class A Nonvoting Common Share* to range from $0.30 to $0.40 during our fiscal 2015 fourth quarter ending July 31, 2015.”

A webcast regarding Brady’s fiscal 2015 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 people, products and places. Brady’s products help customers increase safety, security, productivity and performance and include high-performance labels, signs, safety devices, printing systems and software. Founded in 1914, the Company has a diverse customer base in electronics, telecommunications, manufacturing, electrical, construction, medical, aerospace and a variety of other industries. Brady is headquartered in Milwaukee, Wisconsin and as of August 1, 2014, employed approximately 6,400 people in its worldwide businesses. Brady’s fiscal 2014 sales were approximately $1.23 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.

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 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, 2014.

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 April 30,						Nine months ended April 30,
	2015			2014			2015			2014
Net sales	$	290,227		$	309,577		$	883,095		$	908,301
Cost of products sold		149,228			154,457			453,732			452,797
Gross margin		140,999			155,120			429,363			455,504
Operating expenses:
Research and development		8,928			8,648			27,507			25,675
Selling, general and administrative		102,952			116,666			319,796			340,825
Restructuring charges		4,834			3,039			13,991			14,202
Total operating expenses		116,714			128,353			361,294			380,702

Operating income		24,285			26,767			68,069			74,802

Other income and (expense):
Investment and other income		434			872			968			1,887
Interest expense		(2,503	)		(3,381	)		(8,394	)		(10,777	)

Earnings from continuing operations before income taxes		22,216			24,258			60,643			65,912

Income tax expense		5,003			4,074			16,347			17,077

Earnings from continuing operations	$	17,213		$	20,184		$	44,296		$	48,835

Earnings (loss) from discontinued operations, net of income taxes		—			3,904			(1,915	)		15,606

Net earnings	$	17,213		$	24,088		$	42,381		$	64,441

Earnings from continuing operations per Class A Nonvoting Common Share:
Basic	$	0.34		$	0.39		$	0.86		$	0.94
Diluted	$	0.33		$	0.39		$	0.86		$	0.93

Earnings from continuing operations per Class B Voting Common Share:
Basic	$	0.34		$	0.39		$	0.85		$	0.92
Diluted	$	0.33		$	0.39		$	0.85		$	0.92

Earnings (loss) from discontinued operations per Class A Nonvoting Common Share:
Basic	$	—		$	0.07		$	(0.03	)	$	0.30
Diluted	$	—		$	0.07		$	(0.03	)	$	0.30

Earnings (loss) from discontinued operations per Class B Voting Common Share:
Basic	$	—		$	0.07		$	(0.04	)	$	0.30
Diluted	$	—		$	0.07		$	(0.04	)	$	0.29

Net earnings per Class A Nonvoting Common Share:
Basic	$	0.34		$	0.46		$	0.83		$	1.24
Diluted	$	0.33		$	0.46		$	0.83		$	1.23
Dividends	$	0.20		$	0.195		$	0.60		$	0.585

Net earnings per Class B Voting Common Share:
Basic	$	0.34		$	0.46		$	0.81		$	1.22
Diluted	$	0.33		$	0.46		$	0.81		$	1.21
Dividends	$	0.20		$	0.195		$	0.583		$	0.568

Weighted average common shares outstanding (in thousands):
Basic		51,301			51,933			51,275			52,071
Diluted		51,450			52,000			51,370			52,304


BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands)

	April 30, 2015			July 31, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	100,468		$	81,834
Accounts receivable—net		162,180			177,648
Inventories:
Finished products		69,504			73,096
Work-in-process		18,600			17,689
Raw materials and supplies		25,797			22,490
Total inventories		113,901			113,275
Assets held for sale		—			49,542
Prepaid expenses and other current assets		39,786			41,543
Total current assets		416,335			463,842
Other assets:
Goodwill		478,035			515,004
Other intangible assets		78,764			91,014
Deferred income taxes		24,026			27,320
Other		21,047			22,314
Property, plant and equipment:
Cost:
Land		5,659			7,875
Buildings and improvements		98,156			101,866
Machinery and equipment		280,718			288,409
Construction in progress		7,151			12,500
		391,684			410,650
Less accumulated depreciation		267,906			276,479
Property, plant and equipment—net		123,778			134,171
Total	$	1,141,985		$	1,253,665
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
Notes payable	$	12,001		$	61,422
Accounts payable		72,792			88,099
Wages and amounts withheld from employees		36,164			38,064
Liabilities held for sale		—			10,640
Taxes, other than income taxes		6,578			7,994
Accrued income taxes		3,444			7,893
Other current liabilities		33,783			35,319
Current maturities on long-term debt		42,514			42,514
Total current liabilities		207,276			291,945
Long-term obligations, less current maturities		213,839			159,296
Other liabilities		66,903			69,348
Total liabilities		488,018			520,589
Stockholders’ investment:
Common stock:
Class A nonvoting common stock—Issued 51,261,487 and 51,261,487 shares, respectively and outstanding 47,778,684 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		313,917			311,811
Earnings retained in the business		463,726			452,057
Treasury stock—3,482,803 and 3,477,291 shares, respectively of Class A nonvoting common stock, at cost		(93,300	)		(93,337	)
Accumulated other comprehensive (loss) income		(27,939	)		64,156
Other		(2,985	)		(2,159	)
Total stockholders’ investment		653,967			733,076
Total	$	1,141,985		$	1,253,665


BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)

	Nine months ended April 30,
	2015			2014
Operating activities:
Net earnings	$	42,381		$	64,441
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		28,511			33,782
Non-cash portion of stock-based compensation expense		3,556			5,033
Non-cash portion of restructuring charges		3,545			267
Loss on sale of business, net		426			—
Deferred income taxes		(4,533	)		(8,310	)
Changes in operating assets and liabilities (net of effects of business acquisitions/divestitures):
Accounts receivable		(797	)		2,949
Inventories		(8,385	)		(9,435	)
Prepaid expenses and other assets		201			(2,772	)
Accounts payable and accrued liabilities		(8,399	)		(13,027	)
Income taxes		(3,766	)		2,912
Net cash provided by operating activities		52,740			75,840

Investing activities:
Purchases of property, plant and equipment		(23,545	)		(29,808	)
Sale of business, net of cash retained		6,111			—
Other		3,927			(647	)
Net cash used in investing activities		(13,507	)		(30,455	)

Financing activities:
Payment of dividends		(30,712	)		(30,479	)
Proceeds from issuance of common stock		1,591			10,894
Purchase of treasury stock		—			(23,335	)
Proceeds from borrowing on credit facilities		82,439			66,187
Repayment of borrowing on credit facilities		(17,801	)		(41,401	)
Principal payments on debt		(42,514	)		(42,514	)
Income tax on the exercise of stock options and deferred compensation distributions, and other		(3,832	)		(978	)
Net cash used in financing activities		(10,829	)		(61,626	)

Effect of exchange rate changes on cash		(9,770	)		3,898

Net increase (decrease) in cash and cash equivalents		18,634			(12,343	)
Cash and cash equivalents, beginning of period		81,834			91,058

Cash and cash equivalents, end of period	$	100,468		$	78,715

Supplemental disclosures:
Cash paid during the period for:
Interest	$	9,451		$	11,417
Income taxes, net of refunds		21,692			18,842


BRADY CORPORATION AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited; Dollars in thousands)

	Three Months Ended April 30,						Nine Months Ended April 30,
	2015			2014			2015			2014
SALES TO EXTERNAL CUSTOMERS
ID Solutions	$	200,786		$	206,448		$	604,948		$	610,726
Workplace Safety		89,441			103,129			278,147			297,575
Total	$	290,227		$	309,577		$	883,095		$	908,301

SALES INFORMATION
ID Solutions
Organic		3.0	%		4.8	%		2.4	%		3.6	%
Currency		(5.7	)%		(0.2	)%		(3.3	)%		(0.3	)%
Acquisitions		—	%		—	%		—	%		12.4	%
Total		(2.7	)%		4.6	%		(0.9	)%		15.7	%
Workplace Safety
Organic		(1.1	)%		(1.9	)%		0.6	%		(6.3	)%
Currency		(12.2	)%		0.1	%		(7.1	)%		(0.5	)%
Acquisitions		—	%		—	%		—	%		—	%
Total		(13.3	)%		(1.8	)%		(6.5	)%		(6.8	)%
Total Company
Organic		1.7	%		2.5	%		1.8	%		(0.1	)%
Currency		(8.0	)%		(0.2	)%		(4.6	)%		(0.4	)%
Acquisitions		—	%		—	%		—	%		7.7	%
Total		(6.3	)%		2.3	%		(2.8	)%		7.2	%

SEGMENT PROFIT
ID Solutions	$	41,614		$	44,302		$	120,800		$	132,795
Workplace Safety		12,292			14,771			40,607			47,813
Total	$	53,906		$	59,073		$	161,407		$	180,608
SEGMENT PROFIT AS A PERCENT OF SALES
ID Solutions		20.7	%		21.5	%		20.0	%		21.7	%
Workplace Safety		13.7	%		14.3	%		14.6	%		16.1	%
Total		18.6	%		19.1	%		18.3	%		19.9	%


	Three Months Ended April 30,						Nine Months Ended April 30,
	2015			2014			2015			2014
Total segment profit	$	53,906		$	59,073		$	161,407		$	180,608
Unallocated amounts:
Administrative costs		(24,787	)		(29,267	)		(79,347	)		(91,604	)
Restructuring charges		(4,834	)		(3,039	)		(13,991	)		(14,202	)
Investment and other income		434			872			968			1,887
Interest expense		(2,503	)		(3,381	)		(8,394	)		(10,777	)
Earnings from continuing operations before income taxes	$	22,216		$	24,258		$	60,643		$	65,912


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 April 30,					Nine Months Ended April 30,
		2015			2014		2015			2014
Earnings from Continuing Operations Before Income Taxes (GAAP measure)		$	22,216		$	24,258	$	60,643		$	65,912
	Restructuring charges		4,834			3,039		13,991			14,202
	Postretirement benefit plan curtailment gain		(4,296	)		-		(4,296	)		-

Earnings from Continuing Operations Before Income Taxes Excluding Certain Items (non-GAAP measure)		$	22,754		$	27,297	$	70,338		$	80,114


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 April 30,					Nine Months Ended April 30,
		2015			2014		2015			2014
Income Taxes on Continuing Operations (GAAP measure)		$	5,003		$	4,074	$	16,347		$	17,077
	Restructuring charges		1,636			968		4,406			4,584
	Postretirement benefit plan curtailment gain		(1,504	)		-		(1,504	)		-

Income Taxes on Continuing Operations Excluding Certain Items (non-GAAP measure)		$	5,135		$	5,042	$	19,249		$	21,661


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 April 30,					Nine Months Ended April 30,
		2015			2014		2015			2014
Net Earnings from Continuing Operations (GAAP measure)		$	17,213		$	20,184	$	44,296		$	48,835
	Restructuring charges		3,198			2,071		9,585			9,618
	Postretirement benefit plan curtailment gain		(2,792	)		-		(2,792	)		-

Net Earnings from Continuing Operations Excluding Certain Items (non- GAAP measure)		$	17,619		$	22,255	$	51,089		$	58,453


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 April 30,					Nine Months Ended April 30,
		2015			2014		2015			2014
Net Earnings from Continuing Operations Per Diluted Class A		$	0.33		$	0.39	$	0.86		$	0.93
	Nonvoting Common Share (GAAP measure)
	Restructuring charges		0.06			0.04		0.19			0.18
	Postretirement benefit plan curtailment gain		(0.05	)		-		(0.05	)		-

Net Earnings from Continuing Operations Per Diluted Class A Nonvoting Common Share Excluding Certain Items (non-GAAP measure)		$	0.34		$	0.43	$	0.99		$	1.12