BRC Brady Corp

MILWAUKEE, Sept. 13 /PRNewswire-FirstCall/ -- Brady Corporation (NYSE:BRC) today reported record results for its fiscal 2006 fourth quarter and fiscal year ended July 31, 2006. Sales in the fiscal 2006 fourth quarter rose 37 percent to $288.3 million compared to sales in the fourth quarter of fiscal 2005 of $210.0 million. The increase was comprised of organic growth of 8 percent compared to the prior year's quarter, with acquisitions adding 27 percent, and foreign currency translation contributing 2 percent to sales growth. Net income for the fiscal 2006 fourth quarter was up 40 percent to $22.5 million or $0.43 per diluted Class A Common share, compared with $16.1 million or $0.32 per diluted Class A Common Share in the fourth quarter of fiscal 2005. Earnings per share in fiscal 2006 reflect issuance of an additional 4.6 million shares through an equity offering in the fourth quarter. Brady's fiscal 2006 net sales rose 25 percent to $1.018 billion compared to $816.4 million in sales in fiscal 2005. Organic growth was 9 percent, acquisitions added 16 percent and foreign currency had a negligible impact on total sales results. Net income for fiscal 2006 rose 27 percent to $104.2 million or $2.07 per diluted Class A Common Share, compared to $81.9 million or $1.64 per diluted Class A Common in fiscal 2005. "Fiscal 2006 was an outstanding year for Brady as we hit several important milestones, not the least of which is for the first time in Brady's history we reached sales in excess of $1 billion. The year was also marked by a tremendous amount of activity, including 11 acquisitions; expansions in India, Slovakia and China; and a successful secondary offering of Brady stock," said Brady President and Chief Executive Officer Frank M. Jaehnert. "In fiscal 2006 we were pleased to see solid organic growth, along with strong cash flow from operating activities of $115.3 million," said Brady Vice President and Chief Financial Officer David Mathieson. "With the recent acquisitions of Carroll, Daewon and CIPI, we now expect annual sales of between $1.225 and $1.25 billion in fiscal 2007. Earnings-per-share guidance remains unchanged from our June 5 post-equity-offering guidance of $2.18 to $2.27 per share which is consistent with net income of between $120 and $125 million." A Webcast regarding fiscal 2006 results will be available at http://www.investor.bradycorp.com/ beginning at 9:30 a.m. Central Daylight Time today. 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 more than 8,000 people at operations in the Americas, Europe and Asia/Pacific. More information is available on the Internet at http://www.bradycorp.com/ . Information by regional segment for the three and twelve months ended July 31, 2006 and 2005 is as follows: (in Corporate and Thousands) Americas Europe Asia Subtotals Eliminations Total SALES TO EXTERNAL CUSTOMERS Three months ended: July 31, 2006 $135,470 $88,966 $63,897 $288,333 - $288,333 July 31, 2005 108,019 67,825 34,202 210,046 - 210,046 Twelve months ended: July 31, 2006 $498,916 $319,432 $200,088 $1,018,436 - $1,018,436 July 31, 2005 417,780 274,691 123,976 816,447 - 816,447 SALES GROWTH INFORMATION Three months ended July 31, 2006: Base 5.2% 7.7% 20.8% 8.6% - 8.6% Currency 1.4% 2.4% 2.9% 1.9% - 1.9% Acquisitions 18.8% 21.1% 63.1% 26.8% - 26.8% Total 25.4% 31.2% 86.8% 37.3% - 37.3% Twelve months ended July 31, 2006: Base 5.0% 4.2% 34.7% 9.2% - 9.2% Currency 1.5% -4.3% 1.6% -0.5% - -0.5% Acquisitions 12.9% 16.4% 25.1% 16.0% - 16.0% Total 19.4% 16.3% 61.4% 24.7% - 24.7% SEGMENT PROFIT (LOSS) Three months ended: July 31, 2006 $30,336 $21,900 $12,192 $64,428 ($2,893) $61,535 July 31, 2005 24,227 18,496 8,830 51,553 (1,929) 49,624 Percentage increase (decrease) 25.2% 18.4% 38.1% 25.0% 50.0% 24.0% Twelve months ended: July 31, 2006 $122,525 $83,970 $49,316 $255,811 ($10,633) $245,178 July 31, 2005 98,193 79,792 34,228 212,213 (4,845) 207,368 Percentage increase 24.8% 5.2% 44.1% 20.5% 119.5% 18.2% NET INCOME RECONCILIATION (in thousands) Three months ended: Twelve months ended: July 31, July 31, July 31, July 31, 2006 2005 2006 2005 Total profit for reportable segments $64,428 $51,553 $255,811 $212,213 Corporate and eliminations (2,893) (1,929) (10,633) (4,845) Unallocated amounts: Administrative costs (24,650) (25,442) (88,662) (84,916) Investment and other income (356) 557 2,403 1,369 Interest expense (5,311) (2,126) (14,231) (8,403) ------------------------------------------ Income before income taxes 31,218 22,613 144,688 115,418 Income taxes (8,741) (6,558) (40,513) (33,471) ------------------------------------------ Net income $22,477 $16,055 $104,175 $81,947 ========================================== 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 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 retain significant contracts and customers; future competition; 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; interruptions to sources of supply; environmental, health and safety compliance costs and liabilities; Brady's ability to realize cost savings from operating initiatives; Brady's ability to attract and retain key talent; difficulties associated with exports; risks associated with international operations; fluctuations in currency rates versus the US dollar; technology changes; potential write-offs of Brady's substantial intangible assets; risks associated with obtaining governmental approvals and maintaining regulatory compliance for new and existing products; 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 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 II of Brady's Quarterly Report on Form 10-Q for the period ended April 30, 2006. 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. RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES (in thousands) Fiscal 2005 --------------------------------------------- Q1 Q2 Q3 Q4 Total -- -- -- -- ----- EBITDA (1) Net income $20,357 $20,579 $24,956 $16,055 $81,947 Interest expense 2,139 2,037 2,101 2,126 8,403 Income taxes 9,580 8,811 8,522 6,558 33,471 Depreciation and amortization 6,775 6,478 6,738 6,831 26,822 --------------------------------------------- EBITDA (non-GAAP measure) $38,851 $37,905 $42,317 $31,570 $150,643 Fiscal 2006 --------------------------------------------- Q1 Q2 Q3 Q4 Total -- -- -- -- ----- EBITDA (1) Net income $30,198 $21,254 $30,246 $22,477 $104,175 Interest expense 1,989 2,435 4,496 5,311 14,231 Income taxes 12,334 7,675 11,763 8,741 40,513 Depreciation and amortization 7,360 7,194 9,419 11,171 35,144 --------------------------------------------- EBITDA (non-GAAP measure) $51,881 $38,558 $55,924 $47,700 $194,063 (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. BRADY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands) (Unaudited) --------------------------------------------------------- Three Months Ended July 31 Twelve Months Ended July 31 --------------------------- ---------------------------- Percentage Percentage 2006 2005 Change 2006 2005 Change --------- -------- ------- ---------- -------- -------- Net sales $288,333 $210,046 37.3% $1,018,436 $816,447 24.7% Cost of products sold 144,429 101,119 42.8% 492,681 383,171 28.6% --------- -------- ------- ---------- -------- -------- Gross margin 143,904 108,927 32.1% 525,755 433,276 21.3% Operating expenses: Research and development 9,766 7,334 33.2% 30,443 25,078 21.4% Selling, general and admini- strative 97,253 77,411 25.6% 338,796 285,746 18.6% --------- -------- ------- ---------- -------- -------- Total operating expenses 107,019 84,745 26.3% 369,239 310,824 18.8% Operating income 36,885 24,182 52.5% 156,516 122,452 27.8% Other income and (expense): Investment and other income (356) 557 -163.9% 2,403 1,369 75.5% Interest expense (5,311) (2,126) 149.8% (14,231) (8,403) 69.4% --------- -------- ------- ---------- -------- -------- Income before income taxes 31,218 22,613 38.1% 144,688 115,418 25.4% Income taxes 8,741 6,558 33.3% 40,513 33,471 21.0% --------- -------- ------- ---------- -------- -------- Net income $22,477 $16,055 40.0% $104,175 $81,947 27.1% ========= ======== ======= ========== ======== ======== Per Class A Nonvoting Common Share: Basic net income $0.44 $0.33 33.3% $2.10 $1.67 25.7% Diluted net income $0.43 $0.32 34.4% $2.07 $1.64 26.2% Dividends $0.13 $0.11 18.2% $0.52 $0.44 18.2% Per Class B Voting Common Share: Basic net income $0.44 $0.33 33.3% $2.09 $1.66 25.9% Diluted net income $0.43 $0.32 34.4% $2.05 $1.63 25.8% Dividends $0.13 $0.11 18.2% $0.50 $0.42 19.0% Weighted average common shares outstanding (in Thousands): Basic 50,791 49,240 49,494 48,967 Diluted 51,672 50,232 50,385 49,859 BRADY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (Unaudited) ------------------------------ July 31, 2006 July 31, 2005 ------------- ------------- ASSETS ------ Current assets: Cash and cash equivalents $113,008 $72,970 Short term investments 11,500 7,100 Accounts receivable, less allowance for losses ($6,390 and $3,726, respectively) 187,907 123,453 Inventories: Finished Products 59,365 38,827 Work-in-process 12,850 9,681 Raw materials and supplies 37,702 22,227 ------------- ------------ Total inventories 109,917 70,735 Prepaid expenses and other current assets 36,825 28,114 ------------- ------------ Total current assets 459,157 302,372 Other assets: Goodwill 587,642 332,369 Other Intangible assets, net 134,111 71,647 Deferred Income Taxes 34,135 39,043 Other 10,235 6,305 ------------- ------------ Total other assets 766,123 449,364 Property, plant and equipment: Cost: Land 6,548 6,388 Buildings and improvements 78,418 65,007 Machinery and equipment 198,426 157,093 Construction in progress 12,098 6,510 ------------- ------------ 295,490 234,998 Less accumulated depreciation 155,584 136,587 ------------- ------------ Net property, plant and equipment 139,906 98,411 ------------- ------------ Total $1,365,186 $850,147 ============= ============ LIABILITIES AND STOCKHOLDERS' INVESTMENT ---------------------------------------- Current liabilities: Accounts payable $78,585 $52,696 Wages and amounts withheld from employees 61,778 49,620 Taxes, other than income taxes 6,231 4,815 Accrued income taxes 25,675 24,028 Other current liabilities 46,763 29,649 Short-term borrowings and current maturities on long-term debt 20 4 ------------- ------------ Total current liabilities 219,052 160,812 Long-term obligations, less current maturities 350,018 150,026 Other liabilities 50,502 42,035 ------------- ------------ Total liabilities 619,572 352,873 Stockholders' investment: Common stock: Class A nonvoting common stock - Issued 50,481,743 and 45,877,543 shares, respectively and outstanding 50,188,842 and 45,792,199 shares, respectively 505 458 Class B voting common stock - Issued and outstanding, 3,538,628 shares 35 35 Additional paid-in capital 258,922 99,029 Income retained in the business 460,991 382,880 Treasury Stock - 292,901 and 85,344 shares, respectively of Class A nonvoting common stock, at cost (10,865) (1,575) Accumulated other comprehensive income 35,264 17,497 Other 762 (1,050) ------------- ------------ Total stockholders' investment 745,614 497,274 ------------- ------------ Total $1,365,186 $850,147 ============= ============ BRADY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited) Twelve Months Ended 31-Jul 2006 2005 2004 -------- ------- ------- Operating activities: Net income $104,175 $81,947 $50,871 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 35,144 26,822 20,190 Gain on Foreign Currency Contract (1,516) - - Income tax benefit from the exercise of stock options - 5,385 4,406 Deferred Income taxes (1,843) (2,653) 5,172 Loss on sale or disposal of property, plant & equipment 124 743 321 Provision for losses on accounts receivable 1,152 1,216 1,450 Non-cash portion of stock-based compensation expense 5,568 5,579 1,927 Net restructuring charge accrued liability - - 3,221 Changes in operating assets and liabilities (net of effects of business acquisitions): Accounts receivable (13,620) (7,132) (11,979) Inventories (16,961) (11,847) (6,791) Prepaid expenses and other assets (2,163) (3,572) 2,168 Accounts payable and accrued liabilities 10,421 8,827 15,210 Income taxes 492 9,662 (393) Other liabilities (5,643) 4,126 1,873 -------- ------- ------- Net cash provided by operating activities 115,330 119,103 87,646 Investing activities: Acquisition of businesses, net of cash acquired (347,681) (79,926) (228,928) Purchases of short-term investments (150,900) (50,025) (38,450) Sales of short-term investments 146,500 48,075 42,850 Purchases of property, plant and equipment (39,410) (21,920) (14,892) Purchase of Foreign Currency Contract (2,134) - - Proceeds from sale of property, plant and equipment 546 390 448 Other (2,203) (1,686) (1,533) -------- ------- ------- Net cash used in investing activities (395,282) (105,092) (240,505) Financing activities: Payment of dividends (26,064) (21,291) (19,805) Proceeds from issuance of common stock 166,664 15,734 19,422 Principal payments on debt (417,601) (85,604) (161,578) Proceeds from issuance of debt 615,730 83,000 310,000 Purchase of treasury stock (24,683) (1,551) (564) Income tax benefit from the exercise of stock options 4,912 - - Debt issue costs - - (1,372) -------- ------- ------- Net cash provided by (used in) financing activities 318,958 (9,712) 146,103 Effect of exchange rate changes on cash 1,032 (117) 6,939 Net increase in cash and cash equivalents 40,038 4,182 183 Cash and cash equivalents, beginning of period 72,970 68,788 68,605 -------- ------- ------- Cash and cash equivalents, end of period 113,008 72,970 68,788 ======== ======= ======= Supplemental disclosures: Cash paid during the period for: Interest, net of capitalized interest $8,991 7,836 506 Income taxes, net of refunds 37,661 19,358 10,977 Acquisitions: Fair value of asset acquired, net of cash $167,900 60,193 96,656 Liabilities assumed (63,667) (35,113) (8,674) Goodwill 247,098 54,846 140,946 Effect of foreign currency contract (3,650) - - -------- ------- ------- Net cash paid for acquisitions $347,681 79,926 228,928 ======== ======= ======= DATASOURCE: Brady Corporation CONTACT: Investor contact, Barbara Bolens, +1-414-438-6940, or Media contact, Carole Herbstreit, +1-414-438-6882, both of Brady Corporation Web site: http://www.bradycorp.com/ http://www.investor.bradycorp.com/ Company News On-Call: http://www.prnewswire.com/comp/952350.html

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