BRC Brady Corp

Brady Corporation (NYSE:BRC) today reported record results for its fiscal 2008 fourth quarter and fiscal year ended July 31, 2008. Sales in the fiscal 2008 fourth quarter rose 9 percent to $396.8 million compared to sales in the fourth quarter of fiscal 2007 of $362.8 million. The increase was comprised of acquisition growth adding 3 percent and foreign currency translation contributing 6 percent to sales growth. Organic growth was flat compared to the prior year�s quarter. Regionally, sales were up 16 percent in Europe and 20 percent in Asia/Pacific; sales in the Americas region were flat. The consolidation of the Brady Americas and Direct Marketing/People ID Americas businesses under single leadership was finalized in the fourth quarter and as such, segment results are reported accordingly beginning this quarter. Net income for the fiscal 2008 fourth quarter was up 33 percent to $34.8 million or $0.64 per diluted Class A Common share, compared to $26.2 million or $0.48 per diluted Class A Common share in the fourth quarter of fiscal 2007, which included cost reduction charges of $5.4 million after tax in the quarter or $0.10 per share. Brady�s fiscal 2008 net sales rose 12 percent to $1.523 billion compared to $1.363 billion in sales in fiscal 2007. Organic growth was flat; acquisitions and foreign currency translation each added 6 percent to total sales results. Net income for fiscal 2008 rose 21 percent to $132.2 million or $2.41 per diluted Class A Common share, compared to $109.4 million or $2.00 per share in fiscal 2007. Net income results for fiscal 2007 included cost reduction charges of $8.3 million after tax or $0.15 per share. �We are very pleased with our results in fiscal 2008, especially in light of the challenging economic environment. Of particular note is Asia�s return to core growth in the fourth quarter with total segment sales up 20 percent and profit up 40 percent following a deliberate re-focus on higher margin products and the success of our cost-control efforts put in place last fiscal year,� said Brady President and CEO Frank M. Jaehnert. �Cash flow from operations was a solid $73 million in the fourth quarter, up 30 percent from the prior year fourth quarter; and $226 million for the year, up 66 percent from fiscal 2007,� said Brady Chief Financial Officer Thomas J. Felmer. �We see a challenging global economy in front of us this fiscal year and will continue to drive working capital improvements and look for ways to keep our cost structure in line. As a result of the recent material changes in currency markets and current economic conditions, we are revising our guidance for fiscal 2009 from sales of between $1.56 to $1.59 billion, to sales of between $1.52 and $1.55 billion; and from net income of between $145 and $152 million and earnings per diluted share of between $2.63 to $2.75, to net income of between $140 and $145 million and diluted earnings per share between $2.54 and $2.63. In keeping with prior practice, this guidance does not assume any future acquisitions.� A Webcast regarding fiscal 2008 results will be available at 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 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 7,800 people at operations in the Americas, Europe and Asia/Pacific. 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 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 Annual Report on Form 10-K for the period ended July 31, 2007. 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. � Information by regional segment for the three and twelve months ended July 31, 2008 and 2007 is as follows: (in thousands) � Americas � � Europe � � Asia-Pacific � Subtotals � � Corporate andEliminations � � Total � SALES TO EXTERNAL CUSTOMERS � � � � � � � � � � � � � � � � � � Three months ended: � � � � � � � � � � � � � � � � � � July 31, 2008 � $169,303 � � $131,765 � � $95,781 � � $396,849 � � - � � $396,849 � July 31, 2007 � 169,063 � � 114,037 � � 79,665 � � 362,765 � � - � � 362,765 � � � � � � � � � � � � � � � � � � � � Twelve months ended: � � � � � � � � � � � � � � � � � � July 31, 2008 � $667,106 � � $496,715 � � $359,195 � � $1,523,016 � � - � � $1,523,016 � July 31, 2007 � 609,855 � � 416,514 � � 336,262 � � 1,362,631 � � - � � 1,362,631 � � � � � � � � � � � � � � � � � � � � SALES GROWTH INFORMATION � � � � � � � � � � � � � � � � � � Three months ended July 31, 2008: � � � � � � � � � � � � � � � � � � Base � -2.2 % � -3.1 % � 11.5 % � 0.6 % � - � � 0.6 % Currency � 1.7 % � 10.9 % � 8.7 % � 6.1 % � - � � 6.1 % Acquisitions � 0.6 % � 7.8 % � 0.0 % � 2.7 % � - � � 2.7 % Total � 0.1 % � 15.6 % � 20.2 % � 9.4 % � - � � 9.4 % � � � � � � � � � � � � � � � � � � � Twelve months ended July 31, 2008: � � � � � � � � � � � � � � � � � � Base � 0.9 % � -0.4 % � -1.1 % � 0.0 % � - � � 0.0 % Currency � 2.0 % � 10.6 % � 7.6 % � 6.0 % � - � � 6.0 % Acquisitions � 6.5 % � 9.1 % � 0.3 % � 5.8 % � - � � 5.8 % Total � 9.4 % � 19.3 % � 6.8 % � 11.8 % � - � � 11.8 % � � � � � � � � � � � � � � � � � � � SEGMENT PROFIT (LOSS) � � � � � � � � � � � � � � � � � � Three months ended: � � � � � � � � � � � � � � � � � � July 31, 2008 � $41,212 � � $38,214 � � $15,129 � � $94,555 � � ($2,648 ) � $91,907 � July 31, 2007 � 39,659 � � 32,573 � � 10,844 � � 83,076 � � (2,989 ) � 80,087 � Percentage increase (decrease) � 3.9 % � 17.3 % � 39.5 % � 13.8 % � -11.4 % � 14.8 % � � � � � � � � � � � � � � � � � � � Twelve months ended: � � � � � � � � � � � � � � � � � � July 31, 2008 � $157,523 � � $135,426 � � $58,234 � � $351,183 � � ($9,048 ) � $342,135 � July 31, 2007 � 144,583 � � 107,552 � � 57,236 � � 309,371 � � (10,485 ) � 298,886 � Percentage increase (decrease) � 8.9 % � 25.9 % � 1.7 % � 13.5 % � -13.7 % � 14.5 % � � � � � � � � � � � � � � NET INCOME RECONCILIATION (in thousands) � � � � � � � � Three months ended: � Twelve months ended: � � � July 31,2008 � July 31,2007 July 31,2008 � July 31,2007 Total profit for reportable segments � $94,555 � � $ 83,076 � $351,183 � � $ 309,371 � Corporate and eliminations � (2,648 ) � (2,989 ) ($9,048 ) � (10,485 ) Unallocated amounts: � � � � � � � � � � � Administrative costs � (37,587 ) � (39,068 ) (134,451 ) � (126,899 ) Investment and other income � 1,581 � � 1,958 � 4,888 � � 2,875 � Interest expense � (5,956 ) � (6,527 ) (26,385 ) � (22,934 ) Income before income taxes � 49,945 � � 36,450 � 186,187 � � 151,928 � Income taxes � (15,170 ) � (10,206 ) (53,999 ) � (42,540 ) Net income � $ 34,775 � � $ 26,244 � $ 132,188 � � $ 109,388 � BRADY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME � � � � (Dollars in Thousands) � (Unaudited) � Three Months Ended July 31, Twelve Months Ended July 31, 2008 2007 PercentageChange � 2008 2007 PercentageChange Net sales $ 396,849 $ 362,765 9.4 % $ 1,523,016 $ 1,362,631 11.8 % Cost of products sold 204,920 � 189,161 � 8.3 % 778,821 � 705,587 � 10.4 % Gross margin 191,929 173,604 10.6 % 744,195 657,044 13.3 % � Operating expenses: Research and development 11,284 9,601 17.5 % 40,607 35,954 12.9 % Selling, general and administrative 126,325 � 122,984 � 2.7 % 495,904 � 449,103 � 10.4 % Total operating expenses 137,609 132,585 3.8 % 536,511 485,057 10.6 % � Operating income 54,320 41,019 32.4 % 207,684 171,987 20.8 % � Other income and (expense): Investment and other income 1,581 1,958 -19.3 % 4,888 2,875 70.0 % Interest expense (5,956 ) (6,527 ) -8.7 % (26,385 ) (22,934 ) 15.0 % � Income before income taxes 49,945 36,450 37.0 % 186,187 151,928 22.5 % � Income taxes 15,170 � 10,206 � 48.6 % 53,999 � 42,540 � 26.9 % � Net income $ 34,775 � $ 26,244 � 32.5 % $ 132,188 � $ 109,388 � 20.8 % � � Per Class A Nonvoting Common Share: Basic net income $ 0.65 $ 0.49 32.7 % $ 2.45 $ 2.03 20.5 % Diluted net income $ 0.64 $ 0.48 33.3 % $ 2.41 $ 2.00 20.5 % Dividends $ 0.15 $ 0.14 7.1 % $ 0.60 $ 0.56 7.1 % � Per Class B Voting Common Share: Basic net income $ 0.65 $ 0.49 32.7 % $ 2.43 $ 2.01 20.9 % Diluted net income $ 0.64 $ 0.48 33.3 % $ 2.39 $ 1.98 20.7 % Dividends $ 0.15 $ 0.14 7.1 % $ 0.58 $ 0.54 7.4 % � Weighted average common shares outstanding (in Thousands): Basic 53,790 54,047 54,168 53,907 Diluted 54,514 54,854 54,873 54,741 � BRADY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS � (IN THOUSANDS) (Unaudited) July 31, 2008 July 31, 2007 � ASSETS � Current assets: Cash and cash equivalents $ 258,355 $ 142,846 Short term investments - 19,200 Accounts receivable, less allowance for losses ($10,059 and 262,461 239,569 $9,109, respectively) Inventories: Finished products 75,665 80,486 Work-in-process 21,187 21,309 Raw materials and supplies 37,767 � 37,983 Total inventories 134,619 139,778 Prepaid expenses and other current assets 43,650 � 42,020 � Total current assets 699,085 583,413 � Other assets: Goodwill 789,107 737,450 Other intangible assets, net 144,791 149,761 Deferred income taxes 25,943 32,508 Other 21,381 � 21,111 � Total other assets 981,222 940,830 � Property, plant and equipment: Cost: Land 6,490 6,332 Buildings and improvements 98,646 90,688 Machinery and equipment 282,232 248,356 Construction in progress 6,040 � 18,107 � 393,408 363,483 Less accumulated depreciation 223,202 � 188,869 � Net property, plant and equipment 170,206 � 174,614 � Total $ 1,850,513 � $ 1,698,857 � LIABILITIES AND STOCKHOLDERS' INVESTMENT � Current liabilities: Accounts payable $ 118,209 $ 91,596 Wages and amounts withheld from employees 82,354 73,622 Taxes, other than income taxes 10,234 8,461 Accrued income taxes 21,523 24,677 Other current liabilities 54,810 60,254 Current maturities on long-term debt 21,431 � 21,444 � Total current liabilities 308,561 280,054 � Long-term obligations, less current maturities 457,143 478,575 � Other liabilities 63,001 � 49,216 � Total liabilities 828,705 807,845 � Stockholders' investment: Common stock: Class A nonvoting common stock - Issued 51,261,487 and 50,586,524 shares,respectively and outstanding 50,005,296 and 50,586,524 shares, respectively 513 506 � Class B voting common stock - Issued and outstanding, 3,538,628 shares 35 35 Additional paid-in capital 292,769 266,203 Income retained in the business 639,059 540,238 Treasury stock - 1,046,191 and 0 shares, respectively of Class A nonvoting commonstock, at cost (33,234 ) 0 Accumulated other comprehensive income 128,161 83,376 Other (5,495 ) 654 � Total stockholders' investment 1,021,808 � 891,012 � Total $ 1,850,513 � $ 1,698,857 � BRADY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited) Twelve Months Ended July 31, � � 2008 2007 2006 Operating activities: Net income $ 132,188 $ 109,388 $ 104,175 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 60,587 53,856 35,144 Gain on foreign currency contract - (1,516 ) Deferred income taxes (1,501 ) 70 (1,843 ) Loss (gain) on disposal of property, plant & equipment 1,672 13 124 Non-cash portion of stock-based compensation expense 10,228 6,907 5,568 Changes in operating assets and liabilities (net of effects of business acquisitions): Accounts receivable (3,704 ) (17,021 ) (12,468 ) Inventories 16,224 (12,323 ) (16,961 ) Prepaid expenses and other assets (629 ) (13,307 ) (2,163 ) Accounts payable and accrued liabilities 18,641 8,058 10,421 Income taxes (8,492 ) (6,821 ) 58 Other liabilities 340 � 7,198 � (5,643 ) Net cash provided by operating activities 225,554 136,018 114,896 � Investing activities: Acquisition of businesses, net of cash acquired (29,346 ) (159,475 ) (351,331 ) Payments of contingent consideration (5,798 ) (10,906 ) - Purchases of short-term investments (10,350 ) (68,100 ) (150,900 ) Sales of short-term investments 29,550 60,400 146,500 Purchases of property, plant and equipment (26,407 ) (51,940 ) (39,410 ) Net settlement of foreign currency contract 1,516 Proceeds from sale of property, plant and equipment 880 2,166 546 Other 2,263 � (9,184 ) (2,203 ) Net cash used in investing activities (39,208 ) (237,039 ) (395,282 ) � Financing activities: Payment of dividends (32,464 ) (30,141 ) (26,064 ) Proceeds from issuance of common stock 14,500 6,829 166,664 Principal payments on debt (39,443 ) (110,870 ) (417,601 ) Proceeds from issuance of debt 18,000 259,300 615,730 Purchase of treasury stock (42,175 ) - (24,683 ) Excess income tax benefit from the exercise of stock options 4,638 � 4,303 � 4,912 � Net (used in) provided by financing activities (76,944 ) 129,421 318,958 Effect of exchange rate changes on cash 6,107 1,438 1,466 � Net increase (decrease) in cash and cash equivalents 115,509 29,838 40,038 Cash and cash equivalents, beginning of period 142,846 � 113,008 � 72,970 � � Cash and cash equivalents, end of period 258,355 � 142,846 � 113,008 � � Supplemental disclosures: Cash paid during the period for: Interest, net of capitalized interest $ 26,308 $ 19,842 $ 8,991 Income taxes, net of refunds 51,834 49,233 37,661 Acquisitions: Fair value of assets acquired, net of cash $ 21,508 $ 87,398 $ 167,900 Liabilities assumed (9,038 ) (33,248 ) (63,667 ) Goodwill 16,876 � 105,325 � 247,098 � Net cash paid for acquisitions $ 29,346 � $ 159,475 � $ 351,331 � � � RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES (in thousands) � � � � � Fiscal 2007 � Q1 Q2 Q3 Q4 Total EBITDA (1) Net income $ 34,448 $ 19,709 $ 28,987 $ 26,244 $ 109,388 Interest expense 4,735 5,244 6,428 6,527 22,934 Income taxes 13,396 7,665 11,273 10,206 42,540 Depreciation and amortization 12,927 � 13,169 � 14,307 � 13,453 � 53,856 � EBITDA (non-GAAP measure) $ 65,506 $ 45,787 $ 60,995 $ 56,430 $ 228,718 � Fiscal 2008 � Q1 Q2 Q3 Q4 Total EBITDA (1) Net income $ 36,370 $ 26,690 $ 34,353 $ 34,775 $ 132,188 Interest expense 6,720 6,747 6,962 5,956 26,385 Income taxes 15,366 11,276 12,187 15,170 53,999 Depreciation and amortization 14,168 � 15,501 � 16,013 � 14,905 � 60,587 � EBITDA (non-GAAP measure) $ 72,624 $ 60,214 $ 69,515 $ 70,806 $ 273,159 � (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.