Brady Corporation Reports Sales and Earnings for Fiscal 2010 First Quarter

By: Brady Corporation via Business Wire News Releases

November 19, 2009 at 06:00 AM EST

Brady Corporation (NYSE:BRC) today reported sales and earnings for its fiscal 2010 first quarter ended October 31, 2009.

Sales for the quarter were $318.5 million compared to $378.3 million in the first quarter of fiscal 2009. Organic sales declined 15.9 percent in the quarter and acquisitions added 0.1 percent to sales. Currency exchange had no impact on sales results in the quarter. By segment, sales were down 15.3 percent in the Americas, 12.8 percent in Europe and 19.5 percent in Asia/Pacific.

Net income in the fiscal 2010 first quarter, including $2.6 million in after-tax restructuring charges, was $21.7 million compared to $37.1 million in the same quarter last year. Earnings per diluted Class A Common share were $0.41 in the first quarter of fiscal 2010, compared to $0.69 per diluted share in the prior year’s quarter. Excluding restructuring charges, earnings per share were $0.46 in the current quarter compared to $0.71 in the first quarter of fiscal 2009.

“I’m encouraged to see sales improve by 11 percent from our last fiscal quarter, driven by a stabilization in our markets, as well as new-product and market-based initiatives. Compared to last year’s first quarter, our gross margins have improved by 160 basis points as a direct result of our ongoing cost-reduction efforts,” said Frank M. Jaehnert, Brady’s president and chief executive officer. “Our continued investments in new product development resulted in a number of successful launches of new proprietary products in the first quarter, including the BMP™21 Portable Printer for wire identification and general labeling, which has already been well-received by our markets.”

“Our balance sheet remains strong and our cash position improved from $188 million to $208 million in the quarter. This will allow us to take advantage of opportunities for future investments, such as new product development, core growth opportunities and acquisitions,” said Brady Chief Financial Officer Thomas J. Felmer. “While we are encouraged by our results, we remain cautious on our outlook because of limited visibility. We are maintaining our original net income and earnings per diluted share guidance for the current fiscal year of $85 to $95 million and $1.60 to $1.80 per share, excluding pretax restructuring charges of $15 million and $0.20 per share.”

A Web cast regarding fiscal 2010 first quarter results will be available at www.investor.bradycorp.com beginning at 7:00 a.m. Central time.

Brady Corporation is an international manufacturer and marketer of complete solutions that identify and protect premises, products and people. Its 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 more than 500,000 customers in electronics, telecommunications, manufacturing, electrical, construction, education, medical and a variety of other industries. Brady is headquartered in Milwaukee and employs approximately 7,000 people at operations in the Americas, Europe and Asia/Pacific. Brady’s fiscal 2009 sales were approximately $1.2 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.

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 attract and retain key talent; 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 for new and existing products; 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, 2009. 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)

	(Unaudited)

	Three Months Ended October 31,
		2009			2008		Percentage Change
Net sales	$	318,486		$	378,317		-15.8	%
Cost of products sold		161,043			197,171		-18.3	%
Gross margin		157,443			181,146		-13.1	%

Operating expenses:
Research and development		9,609			9,056		6.1	%
Selling, general and administrative		108,676			114,257		-4.9	%
Restructuring charge		3,601			1,639		119.7	%
Total operating expenses		121,886			124,952		-2.5	%

Operating income		35,557			56,194		-36.7	%

Other income and (expense):
Investment and other income		48			1,852		-97.4	%
Interest expense		(5,162	)		(6,361	)	-18.8	%

Income before income taxes		30,443			51,685		-41.1	%

Income taxes		8,775			14,575		-39.8	%

Net income	$	21,668		$	37,110		-41.6	%


Per Class A Nonvoting Common Share:
Basic net income	$	0.41		$	0.70		-41.4	%
Diluted net income	$	0.41		$	0.69		-40.6	%
Dividends	$	0.175		$	0.17		2.9	%

Per Class B Voting Common Share:
Basic net income	$	0.40		$	0.68		-41.2	%
Diluted net income	$	0.39		$	0.67		-41.8	%
Dividends	$	0.158		$	0.15		5.3	%

Weighted average common shares outstanding (in thousands):
Basic		52,337			53,291
Diluted		52,943			53,938


BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)
		(Unaudited)			(Unaudited)
		October 31, 2009			July 31, 2009

ASSETS

Current assets:
Cash and cash equivalents	$	207,638		$	188,156
Accounts receivable, less allowance for losses ($8,484 and $7,931, respectively)		224,494			191,189

Inventories:
Finished products		54,373			53,244
Work-in-process		12,358			13,159
Raw materials and supplies		26,227			27,405
Total inventories		92,958			93,808
Prepaid expenses and other current assets		40,139			36,274

Total current assets		565,229			509,427

Other assets:
Goodwill		764,001			751,173
Other intangible assets, net		113,421			115,754
Deferred income taxes		37,503			36,374
Other		18,990			18,551

Total other assets		933,915			921,852

Property, plant and equipment:
Cost:
Land		6,405			6,335
Buildings and improvements		98,777			96,968
Machinery and equipment		285,724			283,301
Construction in progress		12,955			7,869
		403,861			394,473

Less accumulated depreciation		249,217			242,485

Property, plant and equipment - net		154,644			151,988

Total	$	1,653,788		$	1,583,267

LIABILITIES AND STOCKHOLDERS' INVESTMENT

Current liabilities:
Accounts payable	$	89,359		$	83,793
Wages and amounts withheld from employees		49,864			36,313
Taxes, other than income taxes		7,841			6,262
Accrued income taxes		9,635			5,964
Other current liabilities		48,249			45,247
Current maturities on long-term debt		44,893			44,893

Total current liabilities		249,841			222,472

Long-term obligations, less current maturities		346,457			346,457

Other liabilities		65,857			63,246

Total liabilities		662,155			632,175

Stockholders' investment:
Common stock:
Class A nonvoting common stock - Issued 51,261,487 and 51,261,487 shares, respectively and outstanding 48,810,446 and 48,780,560 shares, respectively		513			513
Class B voting common stock - Issued and outstanding, 3,538,628 shares		35			35
Additional paid-in capital		301,123			298,466
Income retained in the business		685,871			673,342
Treasury stock - 2,241,041 and 2,270,927 shares, respectively of Class A nonvoting common stock, at cost		(68,906	)		(69,823	)
Accumulated other comprehensive income		77,223			53,051
Other		(4,226	)		(4,492	)

Total stockholders' investment		991,633			951,092

Total	$	1,653,788		$	1,583,267


BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)		(Unaudited)
		Three Months Ended
		October 31
		2009			2008
Operating activities:
Net income	$	21,668		$	37,110
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		13,817			13,712
Deferred income taxes		(2,985	)		(499	)
Non-cash portion of stock-based compensation expense		2,952			2,092
Non-cash portion of restructuring		288			335
Other		(4	)		(34	)
Changes in operating assets and liabilities (net of effects of business acquisitions):
Accounts receivable		(28,818	)		(12,571	)
Inventories		3,144			(10,360	)
Prepaid expenses and other assets		(657	)		(8,147	)
Accounts payable and accrued liabilities		20,269			(21,679	)
Income taxes		4,626			(3,513	)
Other liabilities		(464	)		(1,167	)
Net cash provided by (used in) operating activities		33,836			(4,721	)

Investing activities:
Acquisition of business, net of cash acquired		(1,840	)		-
Purchases of property, plant and equipment		(9,001	)		(6,429	)
Other		80			1,300
Net cash used in investing activities		(10,761	)		(5,129	)

Financing activities:
Payment of dividends		(8,578	)		(9,061	)
Proceeds from issuance of common stock		716			1,162
Principal payments on debt		-			(1	)
Purchase of treasury stock		-			(36,508	)
Net income tax benefit from the exercise of stock options and deferred compensation distributions
		173			667
Net cash (used in) financing activities		(7,689	)		(43,741	)
Effect of exchange rate changes on cash		4,096			(25,972	)

Net increase (decrease) in cash and cash equivalents		19,482			(79,563	)
Cash and cash equivalents, beginning of period		188,156			258,355

Cash and cash equivalents, end of period		207,638			178,792

Supplemental disclosures:
Cash paid during the period for:
Interest, net of capitalized interest	$	7,904		$	9,298
Income taxes, net of refunds		8,393			15,605

Acquisitions:
Fair value of assets acquired, net of cash	$	1,104		$	-
Liabilities assumed		(42	)		-
Goodwill		778			-
Net cash paid for acquisitions	$	1,840		$	-


Information by regional segment for the three months ended October 31, 2009 and 2008 is as follows:
(in thousands)	Americas		Europe		Asia-Pacific		Total Region		Corporate and Eliminations		Total
SALES TO EXTERNAL CUSTOMERS
Three months ended:
October 31, 2009	$ 136,239		$ 94,335		$ 87,912		$ 318,486		-		$ 318,486
October 31, 2008	$ 160,916		$ 108,215		$ 109,186		$ 378,317		-		$ 378,317

SALES GROWTH INFORMATION
Three months ended October 31, 2009:
Base	-15.2	%	-12.3	%	-20.4	%	-15.9	%	-		-15.9	%
Currency	-0.1	%	-0.7	%	0.9	%	0.0	%	-		0.0	%
Acquisitions	0.0	%	0.2	%	0.0	%	0.1	%	-		0.1	%
Total	-15.3	%	-12.8	%	-19.5	%	-15.8	%	-		-15.8	%

Three months ended October 31, 2008:
Base	-8.2	%	-5.3	%	11.0	%	-2.5	%	-		-2.5	%
Currency	-0.3	%	-1.6	%	2.2	%	-0.1	%	-		-0.1	%
Acquisitions	0.6	%	6.3	%	0.0	%	2.1	%	-		2.1	%
Total	-7.9	%	-0.6	%	13.2	%	-0.5	%	-		-0.5	%

SEGMENT PROFIT (LOSS)
Three months ended:
October 31, 2009	$ 32,801		$ 24,862		$ 15,127		$ 72,790		$ (2,920	)	$ 69,870
October 31, 2008	$ 35,524		$ 31,138		$ 22,401		$ 89,063		$ (2,307	)	$ 86,756
Percentage increase (decrease)	-7.7	%	-20.2	%	-32.5	%	-18.3	%	26.6	%	-19.5	%


NET INCOME RECONCILIATION (in thousands)
	Three months ended:
	October 31, 2009		October 31, 2008
Total profit for reportable segments	$ 72,790		$ 89,063
Corporate and eliminations	(2,920	)	(2,307	)
Unallocated amounts:
Administrative costs	(30,712	)	(28,923	)
Restructuring charges	(3,601	)	(1,639	)
Investment and other income	48		1,852
Interest expense	(5,162	)	(6,361	)
Income before income taxes	30,443		51,685
Income taxes	(8,775	)	(14,575	)
Net income	$ 21,668		$ 37,110


RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES
(in thousands)

		Fiscal 2010

		Q1	Q2	Q3	Q4	Total
EBITDA (1)
	Net income	$ 21,668				$ 21,668
	Interest expense	5,162				5,162
	Income taxes	8,775				8,775
	Depreciation and amortization	13,817				13,817

	EBITDA (non-GAAP measure)	$ 49,422	$ -	$ -	$ -	$ 49,422

		Fiscal 2009

		Q1	Q2	Q3	Q4	Total
EBITDA (1)
	Net income	$ 37,110				$ 37,110
	Interest expense	6,361				6,361
	Income taxes	14,575				14,575
	Depreciation and amortization	13,712				13,712

	EBITDA (non-GAAP measure)	$ 71,758	$ -	$ -	$ -	$ 71,758

(1)	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 and 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.

Contacts:

Brady Corporation
Investor contact: Barbara Bolens 414-438-6940
Media contact: Carole Herbstreit 414-438-6882