BRC Brady Corp

Brady Corporation (NYSE:BRC) today reported financial results for its fiscal 2011 first quarter ended October 31, 2010.

Net income in the fiscal 2011 first quarter increased 21.3 percent to $26.3 million compared to $21.7 million in the first quarter of fiscal 2010. Excluding $2.6 million in after-tax restructuring charges, net income was up 18.9 percent to $28.9 million compared to $24.3 million in the same quarter last year.

Earnings per diluted Class A Common Share were $0.50 in the first quarter of 2011 compared to $0.41 in the prior year quarter. Excluding after-tax restructuring charges, earnings per diluted Class A Common Share increased 19.6 percent to $0.55 in the first quarter of fiscal 2011, compared to $0.46 per diluted share in the prior year’s first quarter.

Sales for the quarter were up 3.5 percent to $329.6 million compared to $318.5 million in the first quarter of fiscal 2010. Organic sales increased 2.0 percent in the quarter and acquisitions added another 2.0 percent to sales. Currency exchange reduced sales by 0.5 percent in the quarter.

“I’m pleased with the continued improvement in our profitability and gross profit margin as a direct result of our on-going initiatives to streamline our processes and improve our profitability through various activities including those stemming from the Brady Business Performance System (BBPS),” said Frank M. Jaehnert, Brady’s president and chief executive officer. “We also continue to invest in growth initiatives, especially our investment in developing new, proprietary products as well as growth though business acquisitions, both within our core markets and near-in adjacencies.”

“We are encouraged by the traction we have seen in our productivity and cost saving initiatives. As a result of this and the strengthening of certain foreign currencies versus the U.S. dollar, we are increasing our full year fiscal 2011 earnings per diluted Class A Common share guidance from between $1.95 and $2.15 to between $2.05 and $2.25 per share, excluding pretax restructuring charges of $12 to $15 million or $0.17 to $0.21 per share,” said Brady Chief Financial Officer Thomas J. Felmer. “We maintain our mid-single digit sales growth outlook for the balance of fiscal 2011. Our guidance reflects all cost savings we expect to realize this year from these restructuring activities as well as from our BBPS initiatives for operational improvements.”

A Web cast regarding fiscal 2011 first quarter results will be available at www.investor.bradycorp.com beginning at 7:00 a.m. Central time on November 18, 2010.

Brady Corporation is an international manufacturer and marketer of complete solutions that identify and protect premises, products and people. Brady’s 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 1 million customers in electronics, telecommunications, manufacturing, electrical, construction, education, medical and a variety of other industries. Brady is headquartered in Milwaukee, Wisconsin and employs approximately 6,600 people at operations in the Americas, Europe and Asia-Pacific. Brady’s fiscal 2010 sales were approximately $1.26 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 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; 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, 2010. 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, 2010 2009

PercentageChange

Net sales $ 329,588 $ 318,486 3.5 % Cost of products sold 165,076   161,043   2.5 % Gross margin 164,512 157,443 4.5 %   Operating expenses: Research and development 9,944 9,609 3.5 % Selling, general and administrative 109,324 108,676 0.6 % Restructuring charge 3,641   3,601   1.1 % Total operating expenses 122,909 121,886 0.8 %   Operating income 41,603 35,557 17.0 %   Other income and (expense): Investment and other income 290 48 504.2 % Interest expense (5,687 ) (5,162 ) 10.2 %   Income before income taxes 36,206 30,443 18.9 %   Income taxes 9,925   8,775   13.1 %   Net income $ 26,281   $ 21,668   21.3 %     Per Class A Nonvoting Common Share: Basic net income $ 0.50 $ 0.41 22.0 % Diluted net income $ 0.50 $ 0.41 22.0 % Dividends $ 0.18 $ 0.175 2.9 %   Per Class B Voting Common Share: Basic net income $ 0.48 $ 0.40 20.0 % Diluted net income $ 0.48 $ 0.39 23.1 % Dividends $ 0.163 $ 0.158 3.2 %   Weighted average common shares outstanding (in thousands): Basic 52,448 52,337 Diluted 52,810 52,943     BRADY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS     (IN THOUSANDS) (Unaudited) October 31, 2010 July 31, 2010  

ASSETS

  Current assets: Cash and cash equivalents $ 326,100 $ 314,840 Accounts receivable - Net 242,207 221,621 Inventories: Finished products 53,935 52,906 Work-in-process 15,781 13,146 Raw materials and supplies 31,479   28,620   Total inventories 101,195 94,672 Prepaid expenses and other current assets 38,017   37,839     Total current assets 707,519 668,972   Other assets: Goodwill 786,203 768,600 Other intangible assets, net 101,070 103,546 Deferred income taxes 46,874 39,103 Other 21,261 20,808   Property, plant and equipment: Cost: Land 6,346 6,265 Buildings and improvements 102,781 101,138 Machinery and equipment 295,605 289,727 Construction in progress 11,026   9,873   415,758 407,003   Less accumulated depreciation 273,437   261,501     Property, plant and equipment - net 142,321   145,502     Total $ 1,805,248   $ 1,746,531    

LIABILITIES AND STOCKHOLDERS' INVESTMENT

  Current liabilities: Accounts payable $ 95,513 $ 96,702 Wages and amounts withheld from employees 51,577 67,285 Taxes, other than income taxes 7,993 7,537 Accrued income taxes 19,975 10,138 Other current liabilities 54,804 50,862 Current maturities on long-term debt 61,264   61,264     Total current liabilities 291,126 293,788   Long-term obligations, less current maturities 389,660 382,940   Other liabilities 67,243   64,776     Total liabilities 748,029 741,504   Stockholders' investment: Common stock: Class A nonvoting common stock - Issued 51,261,487 and 51,261,487 shares, respectively and outstanding 48,981,331 and 48,875,716 shares, respectively 513 513 Class B voting common stock - Issued and outstanding, 3,538,628 shares 35 35 Additional paid-in capital 306,474 304,205 Income retained in the business 735,368 718,512 Treasury stock - 1,970,156 and 2,175,771 shares, respectively of Class A nonvoting common stock, at cost (60,208 ) (66,314 ) Accumulated other comprehensive income 80,212 50,905 Other (5,175 ) (2,829 )   Total stockholders' investment 1,057,219   1,005,027     Total $ 1,805,248   $ 1,746,531           BRADY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited) Three Months Ended October 31 2010 2009 Operating activities: Net income $ 26,281 $ 21,668 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 12,594 13,817 Deferred income taxes (4,849 ) (2,985 ) Non-cash portion of stock-based compensation expense 4,069 2,952 Non-cash portion of restructuring 951 288 Other 193 (4 ) Changes in operating assets and liabilities (net of effects of business acquisitions): Accounts receivable (13,614 ) (28,818 ) Inventories (3,689 ) 3,144 Prepaid expenses and other assets 1,078 (657 ) Accounts payable and accrued liabilities (18,104 ) 20,269 Income taxes 10,245 4,626 Other liabilities 1,002   (464 ) Net cash provided by operating activities 16,157 33,836   Investing activities: Acquisition of business, net of cash acquired - (1,840 ) Purchases of property, plant and equipment (2,810 ) (9,001 ) Other (908 ) 80   Net cash used in investing activities (3,718 ) (10,761 )   Financing activities: Payment of dividends (9,424 ) (8,578 ) Proceeds from issuance of common stock 2,105 716

Net income tax benefit from the exercise of stock options and deferred compensation distributions

(146 ) 173   Net cash used in financing activities (7,465 ) (7,689 )   Effect of exchange rate changes on cash 6,286 4,096   Net increase in cash and cash equivalents 11,260 19,482 Cash and cash equivalents, beginning of period 314,840   188,156     Cash and cash equivalents, end of period $ 326,100   $ 207,638     Supplemental disclosures: Cash paid during the period for: Interest, net of capitalized interest $ 7,211 $ 7,904 Income taxes, net of refunds 5,907 8,393   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, 2010 and 2009 is as follows: (in thousands)   Americas   Europe   Asia-Pacific   Total Region  

CorporateandEliminations

  Total SALES TO EXTERNAL CUSTOMERS                     Three months ended:                         October 31, 2010   $ 145,988     $ 92,050     $ 91,550     $ 329,588       -     $ 329,588   October 31, 2009   $ 136,239     $ 94,335     $ 87,912     $ 318,486       -     $ 318,486                             SALES GROWTH INFORMATION                 Three months ended October 31, 2010:                 Base     4.3 %     0.7 %     -0.3 %     2.0 %     -       2.0 % Currency     0.7 %     -6.9 %     4.4 %     -0.5 %     -       -0.5 % Acquisitions     2.2 %     3.8 %     0.0 %     2.0 %     -       2.0 % Total     7.2 %     -2.4 %     4.1 %     3.5 %     -       3.5 %                           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 %                           SEGMENT PROFIT (LOSS)                 Three months ended:                         October 31, 2010   $ 39,359     $ 24,061     $ 16,829     $ 80,249     $ (3,436 )   $ 76,813   October 31, 2009   $ 32,801     $ 24,862     $ 15,127     $ 72,790     $ (2,920 )   $ 69,870   Percentage increase (decrease)     20.0 %     -3.2 %     11.3 %     10.2 %     17.7 %     9.9 %                             NET INCOME RECONCILIATION (in thousands)     Three months ended:    

October 31,2010

 

October 31,2009

Total profit for reportable segments   $ 80,249     $ 72,790   Corporate and eliminations     (3,436 )     (2,920 ) Unallocated amounts:         Administrative costs     (31,569 )     (30,712 ) Restructuring charges     (3,641 )     (3,601 ) Investment and other income     290       48   Interest expense     (5,687 )     (5,162 ) Income before income taxes     36,206       30,443   Income taxes     (9,925 )     (8,775 ) Net income   $ 26,281     $ 21,668           RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES (in thousands)         Fiscal 2011  

Q1

Q2

Q3

Q4

Total

EBITDA (1) Net income $ 26,281 $ 26,281 Interest expense 5,687 5,687 Income taxes 9,925 9,925 Depreciation and amortization   12,594                 12,594   EBITDA (non-GAAP measure) $ 54,487   $ -   $ -   $ -   $ 54,487   Fiscal 2010  

Q1

Q2

Q3

Q4

Total

EBITDA (1) Net income $ 21,668 $ 15,001 $ 23,695 $ 21,592 $ 81,956 Interest expense 5,162 5,163 5,147 5,750 21,222 Income taxes 8,775 4,842 7,193 6,636 27,446 Depreciation and amortization   13,817     13,549     12,910     12,746     53,022   EBITDA (non-GAAP measure) $ 49,422   $ 38,555   $ 48,945   $ 46,724   $ 183,646   (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.