Brady Corporation (NYSE: BRC), a world leader in identification
solutions, today announced third quarter sales and earnings for its
fiscal quarter ended April 30, 2009.
Sales for the quarter were $276.7 million compared to sales of
$381.9 million in the fiscal 2008 third quarter, down 27.5 percent.
Organic sales were down 19.9 percent compared to the prior year,
and currency exchange had a negative impact of 7.7 percent on sales
results in the quarter. Regionally, organic sales declined 22.2
percent in the Americas, 22.8 percent in Europe and 10.8 percent in
Asia/Pacific.
Net income for the quarter was $18.0 million compared to $34.4
million in the same quarter last year, down 47.7 percent. Earnings
per diluted Class A Common Share were $0.34 compared to $0.63 in
the prior year. 2009 results include after-tax restructuring
charges of $1.6 million or $0.03 per share in the quarter.
Sales for the nine months ended April 30, 2009 were $921.5
million compared to $1.126 billion in the same period last year,
down 18.2 percent. Net income for the nine-month period was $50.9
million compared to $97.4 million in the prior year, down 47.7
percent. Nine-month earnings per share were $0.96 compared to $1.77
per share in the period last year. Results include after-tax
restructuring charges of $16.8 million or $0.32 per share
year-to-date.
�Business in the quarter continued to be weak across all
geographies and all product lines. Our business seems to be
stabilizing for now, however global economic conditions remain
uncertain and our visibility is limited,� said Brady President and
Chief Executive Officer Frank M. Jaehnert. �We continue to take
actions to reduce cost while investing in key initiatives that will
drive growth when the economy improves.�
�Brady continues to maneuver through this challenging economy by
aggressively managing costs and improving on our already strong
financial position. Cash flow from operations was $55 million in
the quarter and we increased our cash position to $233 million.
This cash, along with our untapped bank revolver, allows us to
maintain flexibility for future opportunities,� said Brady Chief
Financial Officer Thomas J. Felmer. �Based on current economic
conditions and currency exchange rates, our guidance remains
unchanged at net income of between $65 and $75 million, including
after-tax restructuring charges of approximately $20 million; and
earnings per diluted share guidance of between $1.23 and $1.42.
Excluding restructuring charges, we expect net income of between
$85 and $95 million and earnings per diluted share of between $1.61
and $1.80.�
A Web cast of a conference call regarding the company's fiscal
2009 third quarter results will be available at
www.investor.bradycorp.com beginning at 7:00 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 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 about 7,000 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 Form 10-Q 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 Form 10-Q, 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 Form 10-Q, 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 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; Brady�s ability to maintain its debt covenants; unforeseen
tax consequences; 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 I of Brady�s Form 10-K
for the year ended July 31, 2008. 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 April 30, Nine Months Ended April
30, 2009 2008
PercentageChange
2009 2008
PercentageChange
Net sales $ 276,733 $ 381,909 -27.5 % $ 921,499 $ 1,126,167 -18.2 %
Cost of products sold 142,560 � 192,333 � -25.9 % 480,038 � 573,901
� -16.4 % Gross margin 134,173 189,576 -29.2 % 441,461 552,266
-20.1 % � Operating expenses: Research and development 7,766 10,274
-24.4 % 25,325 29,323 -13.6 % Selling, general and administrative
94,906 126,720 -25.1 % 302,776 369,579 -18.1 % Restructuring charge
2,229 � - � - 23,276 � - � - Total operating expenses 104,901
136,994 -23.4 % 351,377 398,902 -11.9 % � Operating income 29,272
52,582 -44.3 % 90,084 153,364 -41.3 % � Other income and (expense):
Investment and other income 989 920 7.5 % 1,143 3,307 -65.4 %
Interest expense (6,307 ) (6,962 ) -9.4 % (18,982 ) (20,429 ) -7.1
% � Income before income taxes 23,954 46,540 -48.5 % 72,245 136,242
-47.0 % � Income taxes 5,994 � 12,187 � -50.8 % 21,325 � 38,829 �
-45.1 % � Net income $ 17,960 � $ 34,353 � -47.7 % $ 50,920 � $
97,413 � -47.7 % � � Per Class A Nonvoting Common Share: Basic net
income $ 0.34 $ 0.64 -46.9 % $ 0.97 $ 1.79 -45.8 % Diluted net
income $ 0.34 $ 0.63 -46.0 % $ 0.96 $ 1.77 -45.8 % Dividends $ 0.17
$ 0.15 13.3 % $ 0.51 $ 0.45 13.3 % � Per Class B Voting Common
Share: Basic net income $ 0.34 $ 0.64 -46.9 % $ 0.95 $ 1.78 -46.6 %
Diluted net income $ 0.34 $ 0.63 -46.0 % $ 0.95 $ 1.76 -46.0 %
Dividends $ 0.17 $ 0.15 13.3 % $ 0.49 $ 0.43 14.0 % � Weighted
average common shares outstanding (in Thousands): Basic 52,286
54,021 52,642 54,294 Diluted 52,594 54,627 52,961 54,992 � � � � �
BRADY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED
BALANCE SHEETS � (IN THOUSANDS) (Unaudited)
April 30, 2009
July 31, 2008
�
ASSETS
�
Current assets: Cash and cash equivalents
$
232,901 $ 258,355
Accounts receivable, less
allowance for losses ($8,138 and $10,059, respectively)
183,287 262,461 Inventories: Finished products
58,417 75,665 Work-in-process
15,569
21,187 Raw materials and supplies
32,201 �
37,767 � Total inventories
106,187 134,619
Prepaid expenses and other current assets
42,167 �
43,650 � �
Total current assets 564,542
699,085 �
Other assets: Goodwill
726,944
789,107 Other intangible assets, net
116,275
144,791 Deferred income taxes
26,145 25,943
Other
16,555 �
21,381 � �
Total other assets
885,919 981,222 �
Property, plant and
equipment: Cost: Land
6,215 6,490 Buildings and
improvements
93,584 98,646 Machinery and equipment
274,091 282,232 Construction in progress
7,301
�
6,040 � �
381,191 393,408 Less accumulated
depreciation
232,035 �
223,202 � �
Net property,
plant and equipment 149,156 �
170,206 � �
Total $ 1,599,617 �
$ 1,850,513
� �
LIABILITIES AND STOCKHOLDERS'
INVESTMENT
�
Current liabilities: Accounts payable
$
79,129 $ 118,209 Wages and amounts withheld
from employees
40,722 82,354 Taxes, other than income
taxes
6,190 10,234 Accrued income taxes
2,533
21,523 Other current liabilities
43,413 54,810
Current maturities on long-term debt
50,000 �
21,431
� �
Total current liabilities 221,987 308,561
�
Long-term obligations, less current maturities
428,572 457,143 �
Other liabilities
57,359 �
63,001 � �
Total liabilities
707,918 828,705 �
Stockholders' investment:
Common stock:
Class A nonvoting common stock -
Issued 48,747,494 and 51,261,487 shares, respectively and
outstanding 50,170,581 and 50,005,296 shares, respectively
513 513 Class B voting common stock - Issued and
outstanding, 3,538,628 shares
35 35 Additional
paid-in capital
298,172 292,769 Earnings retained in
the business
663,069 639,059 Treasury stock -
2,303,993 and 1,046,191 shares, respectively of Class A nonvoting
common stock, at cost
(70,841 ) (33,234
) Accumulated other comprehensive income
5,480
128,161 Other
(4,729 ) (5,495 )
�
Total stockholders' investment 891,699 �
1,021,808 � �
Total $ 1,599,617 �
$ 1,850,513 � � � � � �
BRADY CORPORATION AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands) (Unaudited) Nine Months Ended April 30, 2009
2008 Operating activities: Net income $ 50,920 $ 97,413 Adjustments
to reconcile net income to net cash provided by operating
activities: Depreciation and amortization 40,672 45,682 Non-cash
portion of restructuring charges 2,229 - Non-cash portion of
stock-based compensation expense 6,281 7,797 Other 1,495 (234 )
Changes in operating assets and liabilities (net of effects of
business acquisitions): Accounts receivable 52,276 4,014
Inventories 16,793 15,012 Prepaid expenses and other assets (3,593
) (6,193 ) Accounts payable and accrued liabilities (73,381 )
(6,175 ) Income taxes (17,571 ) (6,358 ) Other liabilities 908 �
1,157 � Net cash provided by operating activities 77,029 152,115 �
Investing activities: Acquisition of businesses, net of cash
acquired - (28,871 ) Purchase price adjustment 3,514 - Payments of
contingent consideration (1,405 ) (5,798 ) Purchases of short-term
investments - (10,350 ) Sales of short-term investments - 29,550
Purchases of property, plant and equipment (16,035 ) (19,029 )
Other 2,893 � 1,808 � Net cash used in investing activities (11,033
) (32,690 ) � Financing activities: Payment of dividends (26,910 )
(24,341 ) Proceeds from issuance of common stock 1,321 9,517
Principal payments on debt (3 ) (14 ) Purchase of treasury stock
(40,267 ) (28,531 )
Income tax benefit from the
exercise of stock options and deferred compensation
distribution
860 � 4,620 � Net cash used in financing activities (64,999 )
(38,749 ) Effect of exchange rate changes on cash (26,451 ) 3,837 �
Net (decrease) increase in cash and cash equivalents (25,454 )
84,513 Cash and cash equivalents, beginning of period 258,355 �
142,846 � � Cash and cash equivalents, end of period 232,901 �
227,359 � � Supplemental disclosures: Cash paid during the period
for: Interest, net of capitalized interest $ 21,899 $ 22,450 Income
taxes, net of refunds 32,995 39,505 Acquisitions: Fair value of
assets acquired, net of cash $ - $ 18,547 Liabilities assumed -
(6,566 ) Goodwill - � 16,890 � Net cash paid for acquisitions $ - �
$ 28,871 � � � Information by regional segment for the three and
six months ended April 30, 2009 and 2008 is as follows: (in
thousands) � Americas � Europe � Asia-Pacific � Subtotals �
Corporate andEliminations
� � Total
SALES TO EXTERNAL CUSTOMERS � � � � � � � � � � �
� � Three months ended: � � � � � � � � � � � � � April 30, 2009 �
$125,688 � $85,172 � $65,873 � $276,733 � - � � $276,733 April 30,
2008 � $166,407 � $133,422 � $82,080 � $381,909 � - � � $381,909 �
� � � � � � � � � � � � � Nine months ended: � � � � � � � � � � �
� � April 30, 2009 � $409,573 � $280,589 � $231,337 � $921,499 � -
� � $921,499 April 30, 2008 � $497,803 � $364,951 � $263,413 �
$1,126,167 � - � � $1,126,167 � � � � � � � � � � � � � �
SALES
GROWTH INFORMATION � � � � � � � � � � � � � Three months ended
April 30, 2009: � � � � � � � � � � � � � Base � -22.2% � -22.8% �
-10.8% � -19.9% � - � � -19.9% Currency � -2.4% � -13.4% � -8.9% �
-7.7% � - � � -7.7% Acquisitions � 0.1% � 0.0% � 0.0% � 0.1% � - �
� 0.1% Total � -24.5% � -36.2% � -19.7% � -27.5% � - � � -27.5% � �
� � � � � � � � � � � � Nine months ended April 30, 2009: � � � � �
� � � � � � � � Base � -16.4% � -15.6% � -8.7% � -14.3% � - � �
-14.3% Currency � -1.7% � -9.4% � -3.5% � -4.7% � - � � -4.7%
Acquisitions � 0.4% � 1.9% � 0.0% � 0.8% � - � � 0.8% Total �
-17.7% � -23.1% � -12.2% � -18.2% � - � � -18.2% � � � � � � � � �
� � � � �
SEGMENT PROFIT � � � � � � � � � � � � � Three
months ended: � � � � � � � � � � � � � April 30, 2009 � $28,540 �
$23,773 � $6,979 � $59,292 � ($1,717) � � $57,575 April 30, 2008 �
$40,169 � $36,245 � $11,055 � $87,469 � ($1,816) � � $85,653
Percentage increase (decrease) � -29.0% � -34.4% � -36.9% � -32.2%
� -5.5% � � -32.8% � � � � � � � � � � � � � � Nine months ended: �
� � � � � � � � � � � � April 30, 2009 � $86,104 � $77,857 �
$33,502 � $197,463 � ($6,631) � � $190,832 April 30, 2008 �
$116,312 � $97,212 � $43,105 � $256,629 � ($6,400) � � $250,229
Percentage increase (decrease) � -26.0% � -19.9% � -22.3% � -23.1%
� 3.6% � � -23.7% � � � � � � � � � � � � �
NET INCOME
RECONCILIATION (in thousands) � � � � � Three months ended:
Nine months ended: � � April 30, 2009 � April 30, 2008 April 30,
2009 � April 30, 2008 Total profit for reportable segments �
$59,292 � $ 87,469 $197,463 � $ 256,629 Corporate and eliminations
� (1,717) � (1,816) ($6,631) � (6,400) Unallocated amounts: � � � �
� � � Administrative costs � (26,074) � (33,071) (77,472) �
(96,865) Restructuring costs � (2,229) � - (23,276) � - Investment
and other income � 989 � 920 1,143 � 3,307 Interest expense �
(6,307)
� (6,962) (18,982) � (20,429) Income before income taxes � 23,954 �
46,540 72,245 � 136,242 Income taxes � (5,994) � (12,187) (21,325)
� (38,829) Net income � $ 17,960 � $ 34,353 $ 50,920 � $ 97,413 � �
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES � � (in
thousands) � � � � Fiscal 2008 �
Q1
Q2
Q3
Q4
Total
EBITDA (1) Net income $ 36,370 $ 26,690 $ 34,353 $ 97,413 Interest
expense 6,720 6,747 6,962 20,429 Income taxes 15,366 11,276 12,187
38,829 Depreciation and amortization � 14,168 � � 15,501 � � �
16,013 � � � � 45,682 � EBITDA (non-GAAP measure) $ 72,624 $ 60,214
$ 69,515 $ - $ 202,353 � Fiscal 2009 �
Q1
Q2
Q3
Q4
Total
EBITDA (1) Net income (loss) $ 37,110 $ (4,150 ) $ 17,960 $ 50,920
Interest expense 6,361 6,314 6,307 18,982 Income taxes 14,575 756
5,994 21,325 Depreciation and amortization � 13,712 � � 13,481 � �
� 13,479 � � � � 40,672 � EBITDA (non-GAAP measure) $ 71,758 $
16,401 $ 43,740 $ - $ 131,899 � �
(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.
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