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.
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