BRC Brady Corp

MILWAUKEE, May 17 /PRNewswire-FirstCall/ -- Brady Corporation (NYSE:BRC), a world leader in identification solutions, today announced record sales and earnings for its fiscal 2006 third quarter ended April 30, 2006. Sales for the quarter were $266.5 million, up 27 percent compared to sales of $209.8 million in the third quarter last year. Base sales were up 12 percent over the prior year, acquisitions contributed 17 percent to sales growth, and currency exchange reduced sales by 2 percent. Net income for the quarter was up 21.2 percent to $30.2 million compared to $25.0 million in the same quarter last year. Earnings per diluted Class A Common Share were $0.61, up from $0.50 per share in the fiscal 2005 third quarter. Sales for the nine months ended April 30, 2006, rose 20 percent to $730.1 million compared to $606.4 million in the same period last year. Net income for the nine-month period was $81.7 million, up 24 percent compared to $65.9 million in the prior year. Nine-month earnings per share were $1.64 compared to $1.32 per share in the period last year. "We are particularly pleased to see healthy organic growth in all regions. Both the Americas and Europe had solid core growth of 6 percent in the third quarter, while the Asia/Pacific region continues to experience more rapid growth with core business up 49 percent in the third quarter," said Brady President and Chief Executive Officer Frank M. Jaehnert. Brady Chief Financial Officer David Mathieson said, "We are increasing our guidance for our fiscal year ending July 31, 2006 to net income of between $103 to $104 million or $2.06 to $2.08 per share, from previously stated guidance of between $100 to $103 million or $2.00 to $2.06 per share. We are also increasing our sales guidance for fiscal 2006 to between $985 million to $995 million, from previously stated guidance of between $980 and $990 million in sales. This guidance does not include results from Tradex Converting AB and Daewon Industry Corp., as these previously announced acquisitions have not yet closed." A webcast of a conference call regarding the company's fiscal 2006 third quarter results will be available at http://www.investor.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. Its products 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 300,000 customers in electronics, telecommunications, manufacturing, electrical, construction, education, medical and a variety of other industries. Brady is headquartered in Milwaukee and employs about 5,500 people in operations in the United States, Europe, Asia/Pacific, Latin America and Canada. Brady's fiscal 2005 sales were approximately $816 million. More information is available on the Internet at http://www.bradycorp.com/ . Information by regional segment for the three and nine months ended April 30, 2006 and 2005 is as follows: Corporate and Elim- (in Thousands) Americas Europe Asia Subtotals inations Total SALES TO EXTERNAL CUSTOMERS Three months ended: April 30, 2006 $137,438 $80,420 $48,636 $266,494 - $266,494 April 30, 2005 109,058 71,452 29,256 209,766 - 209,766 Nine months ended: April 30, 2006 $363,446 $230,466 $136,191 $730,103 - $730,103 April 30, 2005 309,762 206,865 89,774 606,401 - 606,401 SALES GROWTH INFORMATION Three months ended April 30, 2006: Base 5.8% 6.0% 48.9% 11.8% - 11.8% Currency 1.4% -8.4% 0.3% -2.1% - -2.1% Acquisitions 18.8% 15.0% 17.1% 17.3% - 17.3% Total 26.0% 12.6% 66.3% 27.0% - 27.0% Nine months ended April 30, 2006: Base 4.9% 3.1% 40.0% 9.5% - 9.5% Currency 1.5% -6.5% 1.0% -1.3% - -1.3% Acquisitions 10.9% 14.8% 10.7% 12.2% - 12.2% Total 17.3% 11.4% 51.7% 20.4% - 20.4% SEGMENT PROFIT (LOSS) Three months ended: April 30, 2006 $35,026 $21,304 $12,397 $68,727 ($2,724) $66,003 April 30, 2005 28,155 21,563 7,778 57,496 (905) 56,591 Percentage increase (decrease) 24.4% -1.2% 59.4% 19.5% 201.0% 16.6% Nine months ended: April 30, 2006 $92,188 $62,071 $37,124 $191,383 ($7,741) $183,642 April 30, 2005 73,966 61,296 25,397 160,659 (2,915) 157,744 Percentage increase 24.6% 1.3% 46.2% 19.1% 165.6% 16.4% NET INCOME RECONCILIATION (in thousands) Three months Nine months ended: ended: April April April April 30, 30, 30, 30, 2006 2005 2006 2005 Total profit for reportable segments $68,727 $57,496 $191,383 $160,659 Corporate and eliminations (2,724) (905) (7,741) (2,915) Unallocated amounts: Administrative costs (20,947) (19,288) (61,885) (55,526) Interest - - net (3,784) (1,826) (7,694) (5,472) Foreign exchange 1,574 (211) 1,635 35 Other (837) (1,788) (2,228) (3,976) Income before income taxes 42,009 33,478 113,470 92,805 Income taxes (11,763) (8,522) (31,772) (26,913) Net income $30,246 $24,956 $81,698 $65,892 RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES (in thousands) Fiscal 2005 ---------------------------------------------------- 9 Months Q1 Q2 Q3 YTD Q4 Total -- -- -- --- -- ----- EBITDA (1) Net income $20,357 $20,579 $24,956 $65,892 $16,055 $81,947 Interest expense 2,139 2,037 2,101 6,277 2,126 8,403 Income taxes 9,580 8,811 8,522 26,913 6,558 33,471 Depreciation and amortization 6,775 6,478 6,738 19,991 6,831 26,822 ---------------------------------------------------- EBITDA (non-GAAP measure) $38,851 $37,905 $42,317 $119,073 $31,570 $150,643 Fiscal 2006 ---------------------------------------------------- 9 Months Q1 Q2 Q3 YTD Q4 Total -- -- -- --- -- ----- EBITDA (1) Net income $30,198 $21,254 $30,246 $81,698 $81,698 Interest expense 1,989 2,435 4,496 8,920 8,920 Income taxes 12,334 7,675 11,763 31,772 31,772 Depreciation and amortization 7,360 7,194 9,419 23,973 23,973 ---------------------------------------------------- EBITDA (non-GAAP measure) $51,881 $38,558 $55,924 $146,363 $- $146,363 (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. This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 - that is, statements related to future, not past events. In this context forward-looking statements often address our expected future business and financial performance, and often contain certain words such as "expect, anticipate, intend, plan, believe, seek, will, or may." Forward-looking statements by their nature address matters that are, to different degrees uncertain. For us, uncertainties arise from future financial performance of major markets we serve which include, without limitation, telecommunications, manufacturing, electrical, construction, laboratory, education, governmental, public utility, computer, transportation; future integration of and performance of acquired businesses; fluctuations in currency rates versus the US dollar; technology changes; interruptions to sources of supply; business interruptions due to implementing business systems; and numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature and those identified in reports we file with the SEC. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements. BRADY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands) (Unaudited) -------------------------------------------------------- Three Months Ended April 30, Nine Months Ended April 30, ---------------------------- --------------------------- Percentage Percentage 2006 2005 Change 2006 2005 Change --------- -------- ------- -------- -------- ------- Net sales $266,494 $209,766 27.0% $730,103 $606,401 20.4% Cost of products sold 125,739 95,898 31.1% 348,252 282,052 23.5% --------- -------- -------- -------- Gross margin 140,755 113,868 23.6% 381,851 324,349 17.7% Operating expenses: Research and development 7,314 5,941 23.1% 20,677 17,744 16.5% Selling, general and administrative 89,215 72,384 23.3% 241,543 208,335 15.9% --------- -------- -------- -------- Total operating expenses 96,529 78,325 23.2% 262,220 226,079 16.0% Operating income 44,226 35,543 24.4% 119,631 98,270 21.7% Other income and (expense): Investment and other income 2,279 36 6230.6% 2,759 812 239.8% Interest expense (4,496) (2,101) 114.0% (8,920) (6,277) 42.1% --------- -------- -------- -------- Income before income taxes 42,009 33,478 25.5% 113,470 92,805 22.3% Income taxes 11,763 8,522 38.0% 31,772 26,913 18.1% Net income $30,246 $24,956 21.2% $81,698 $65,892 24.0% --------- -------- -------- -------- Per Class A Nonvoting Common Share: Basic net income $0.62 $0.51 21.6% $1.67 $1.35 23.7% Diluted net income $0.61 $0.50 22.0% $1.64 $1.32 24.2% Dividends $0.13 $0.11 18.2% $0.39 $0.33 18.2% Per Class B Voting Common Share: Basic net income $0.62 $0.51 21.6% $1.65 $1.33 24.1% Diluted net income $0.61 $0.50 22.0% $1.62 $1.31 23.7% Dividends $0.13 $0.11 18.2% $0.37 $0.31 19.4% Weighted average common shares outstanding (in Thousands): Basic 48,923 49,177 49,039 48,872 Diluted 49,833 50,192 49,962 49,754 BRADY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (Unaudited) -------------------------------- April 30, 2006 July 31, 2005 -------------- ------------- ASSETS ------ Current assets: Cash and cash equivalents $90,314 $72,970 Short term investments 30,000 7,100 Accounts receivable, less allowance for losses ($5,309 and 166,962 123,453 $3,726, respectively) Inventories: Finished Products 53,100 38,827 Work-in-process 8,889 9,681 Raw materials and supplies 31,863 22,227 -------------- ------------- Total inventories 93,852 70,735 Prepaid expenses and other current assets 37,402 28,114 -------------- ------------- Total current assets 418,530 302,372 Other assets: Goodwill 452,748 332,369 Other Intangible assets, net 95,189 71,647 Deferred Income Taxes 40,302 39,043 Other 9,145 6,305 -------------- ------------- Total other assets 597,384 449,364 Property, plant and equipment: Cost: Land 6,553 6,388 Buildings and improvements 73,606 65,007 Machinery and equipment 175,205 157,093 Construction in progress 10,424 6,510 -------------- ------------- 265,788 234,998 Less accumulated depreciation 150,251 136,587 -------------- ------------- Net property, plant and equipment 115,537 98,411 -------------- ------------- Total $1,131,451 $850,147 ============== ============= LIABILITIES AND STOCKHOLDERS' INVESTMENT ---------------------------------------- Current liabilities: Accounts payable $60,790 $52,696 Wages and amounts withheld from employees 46,361 49,620 Taxes, other than income taxes 6,443 4,815 Accrued income taxes 23,205 24,028 Other current liabilities 32,713 29,649 Short-term borrowings and current maturities on long-term debt 126 4 -------------- ------------- Total current liabilities 169,638 160,812 Long-term obligations, less current maturities 350,187 150,026 Other liabilities 56,377 42,035 -------------- ------------- Total liabilities 576,202 352,873 Stockholders' investment: Common stock: Class A nonvoting common stock - Issued 45,881,743 and 45,877,543 shares, respectively and outstanding 45,462,077 and 45,792,199 shares, respectively 459 458 Class B voting common stock - Issued and outstanding, 3,538,628 shares 35 35 Additional paid-in capital 101,242 99,029 Income retained in the business 445,508 382,880 Treasury Stock - 419,666 and 85,344 shares, respectively of Class A nonvoting common stock, at cost (15,341) (1,575) Accumulated other comprehensive income 25,198 17,497 Other (1,852) (1,050) -------------- ------------- Total stockholders' investment 555,249 497,274 -------------- ------------- Total $1,131,451 $850,147 ============== ============= BRADY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in Thousands) (Unaudited) Nine Months Ended April 30 2006 2005 --------- --------- Operating activities: Net income $81,698 $65,892 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 23,973 19,991 Gain on Foreign Currency Contract (1,517) Income tax benefit from the exercise of stock options - 4,747 Deferred Income taxes 2,397 (2,354) Loss on sale or disposal of property, plant & equipment 188 599 Provision for losses on accounts receivable 1,102 980 Non-cash portion of stock-based compensation expense 4,275 3,101 Changes in operating assets and liabilities (net of effects of business acquisitions): Accounts receivable (25,570) (5,099) Inventories (14,123) (8,423) Prepaid expenses and other assets (8,501) (979) Accounts payable and accrued liabilities (3,748) (10,056) Income taxes (1,657) 10,107 Other liabilities 4,813 3,491 --------- --------- Net cash provided by operating activities 63,330 81,997 Investing activities: Acquisition of businesses, net of cash acquired (155,283) (49,397) Purchases of short-term investments (33,800) (34,000) Sales of short-term investments 10,900 22,950 Purchases of property, plant and equipment (26,291) (14,411) Purchase of Foreign Currency Contract (2,134) - Proceeds from sale of property, plant and equipment (51) 288 Other (1,907) (1,188) --------- --------- Net cash used in investing activities (208,566) (75,758) Financing activities: Payment of dividends (19,070) (15,885) Proceeds from issuance of common stock 6,960 14,635 Principal payments on debt (721) (83,046) Net proceeds from issuance of debt 200,000 83,000 Purchase of treasury stock (27,299) - Income tax benefit from the exercise of stock options 3,707 - --------- --------- Net cash provided by (used in) financing activities 163,577 (1,296) Effect of exchange rate changes on cash (997) (760) Net increase in cash and cash equivalents 17,344 4,183 Cash and cash equivalents, beginning of period 72,970 68,788 --------- --------- Cash and cash equivalents, end of period $90,314 $72,971 ========= ========= Supplemental disclosures: Cash paid during the period for: Interest, net of capitalized interest $4,572 $4,051 Income taxes, net of refunds 30,844 12,982 Acquisitions: Fair value of asset acquired, net of cash $62,129 $35,971 Liabilities assumed (17,289) (18,212) Goodwill 110,443 31,638 --------- --------- Net cash paid for acquisitions $155,283 $49,397 ========= ========= DATASOURCE: Brady Corporation CONTACT: Investors, Barbara Bolens, +1-414-438-6940, or Media, Carole Herbstreit, +1-414-438-6882, both of Brady Corporation Web site: http://www.bradycorp.com/ Company News On-Call: http://www.prnewswire.com/comp/952350.html

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