Brady Corporation (NYSE: BRC), a world leader in identification
solutions, today reported its financial results for the fiscal 2012
first quarter ended October 31, 2011.
Sales for the fiscal 2012 first quarter were up 6.0 percent to
$349.5 million compared to $329.6 million in the first quarter of
fiscal 2011. Organic sales increased by 3.5 percent, divestitures,
net of acquisitions reduced sales by 0.2 percent, and the impact of
foreign currency translation increased sales by 2.7 percent. By
segment, organic sales increased 5.7 percent in the Americas, 3.7
percent in Europe, and organic sales declined 0.2 percent in the
Asia-Pacific region.
Net income for the quarter ended October 31, 2011 was up 24.5
percent to $32.7 million compared to $26.3 million in the same
quarter last year. Excluding after-tax restructuring charges of
$2.6 million in the first quarter of fiscal 2011, net income was up
13.2 percent. Impacting net income was a 190 basis point reduction
in our gross profit margin to 48.0 percent during the quarter ended
October 31, 2011 and a 200 basis point reduction in selling,
general and administrative expenses as a percentage of sales to
31.2 percent during the quarter ended October 31, 2011. During the
quarter ended October 31, 2011, restructuring related expenses were
not significant and are included in selling, general and
administrative expenses.
Earnings per diluted Class A Common Share were up 24.0 percent
to $0.62 in the first quarter of fiscal 2012 compared to $0.50 in
the first quarter of fiscal 2011.
Commentary and Guidance:
“I am pleased with our net income growth and our organic sales
growth in the first quarter. This profitability improvement is 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
Systems (BBPS),” said Brady’s President and Chief Executive Officer
Frank M. Jaehnert. “We also remain focused on improving our
customer service and our customers’ buying experiences and
investing in growth initiatives, especially our investments in
developing proprietary new products that add customer value.”
“We are committed to putting our cash to work through a balanced
approach of investing in organic growth opportunities, strategic
acquisitions, and returning dividends to our shareholders and
buying back Brady stock from time to time. During the first
quarter, we repurchased 457,360 shares of Brady stock for $12.3
million,” said Brady Chief Financial Officer, Thomas J. Felmer. “We
have recently seen the depreciation of certain foreign currencies
versus the U.S. dollar and we expect some short-term impacts from
the flooding in Thailand. We also remain cautious about the health
of the overall global economy. As we look to the remainder of
fiscal 2012, we are confident in our initiatives to drive revenue
and net profit growth in spite of these challenges and we reiterate
our full year fiscal 2012 guidance which includes low-single-digit
organic sales growth and earnings per diluted Class A Common Share
of between $2.30 and $2.50, exclusive of after-tax restructuring
charges.”
A webcast regarding Brady’s fiscal 2012 first quarter financial
results will be available at www.investor.bradycorp.com beginning at 9:30 a.m.
Central Time today.
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
millions of customers in electronics, telecommunications,
manufacturing, electrical, construction, education, medical and a
variety of other industries. Brady is headquartered in Milwaukee,
Wisconsin and employs approximately 6,500 people at operations in
the Americas, Europe and Asia-Pacific. Brady’s fiscal 2011 sales
were approximately $1.34 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, 2011. 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, Except Per
Share Amounts) (Unaudited) Three Months
Ended October 31, 2011 2010
PercentageChange
Net sales $ 349,508 $ 329,588 6.0 % Cost of products sold 181,677
165,076 10.1 % Gross margin 167,831 164,512 2.0 %
Operating expenses: Research and development 9,809 9,944
-1.4 % Selling, general and administrative 108,932 109,324 -0.4 %
Restructuring charges - 3,641 -100.0 % Total
operating expenses 118,741 122,909 -3.4 % Operating income
49,090 41,603 18.0 % Other income and (expense): Investment
and other income (expense) (202 ) 290 -169.7 % Interest expense
(5,047 ) (5,687 ) -11.3 % Income before income taxes 43,841
36,206 21.1 % Income taxes 11,109 9,925 11.9 %
Net income $ 32,732 $ 26,281 24.5 %
Per Class A Nonvoting Common Share: Basic net income $ 0.62
$ 0.50 24.0 % Diluted net income $ 0.62 $ 0.50 24.0 % Dividends $
0.185 $ 0.18 2.8 % Per Class B Voting Common Share: Basic
net income $ 0.60 $ 0.48 25.0 % Diluted net income $ 0.60 $ 0.48
25.0 % Dividends $ 0.168 $ 0.163 3.1 % Weighted average
common shares outstanding (in thousands): Basic 52,657 52,448
Diluted 52,954 52,810
BRADY CORPORATION AND
SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands) (Unaudited)
October 31,
2011 July 31, 2011
ASSETS
Current assets: Cash and cash equivalents $ 371,594 $
389,971 Accounts receivable - net 232,837 228,483 Inventories:
Finished products 64,652 62,152 Work-in-process 16,259 14,550 Raw
materials and supplies 28,752 27,484 Total
inventories 109,663 104,186 Prepaid expenses and other current
assets 42,120 35,647
Total current
assets 756,214 758,287
Other assets: Goodwill
792,303 800,343 Other intangible assets 84,461 89,961 Deferred
income taxes 50,676 53,755 Other 19,444 19,244
Property,
plant and equipment: Cost: Land 6,360 6,406 Buildings and
improvements 103,683 104,644 Machinery and equipment 303,493
305,557 Construction in progress 13,431 11,226
426,967 427,833 Less accumulated depreciation 290,704
287,918
Property, plant and equipment - net
136,263 139,915
Total $ 1,839,361
$ 1,861,505
LIABILITIES AND
STOCKHOLDERS' INVESTMENT
Current liabilities: Accounts payable $ 96,237 $
98,847 Wages and amounts withheld from employees 46,221 69,798
Taxes, other than income taxes 8,963 7,612 Accrued income taxes
16,170 9,954 Other current liabilities 57,717 54,406 Current
maturities on long-term debt 61,264 61,264
Total current liabilities 286,572 301,881
Long-term obligations, less current maturities 330,054
331,914
Other liabilities 68,200 71,518
Total liabilities 684,826 705,313
Stockholders' investment: Common stock: Class A nonvoting
common stock - Issued 51,261,487 and 51,261,487 shares,
respectively and outstanding 48,862,485 and 49,284,252 shares,
respectively 513 513 Class B voting common stock - Issued and
outstanding, 3,538,628 shares 35 35 Additional paid-in capital
310,602 307,527 Earnings retained in the business 812,142 789,100
Treasury stock - 2,082,801 and 1,667,235 shares, respectively of
Class A nonvoting common stock, at cost (61,015 ) (50,017 )
Accumulated other comprehensive income 96,778 113,898 Other (4,520
) (4,864 )
Total stockholders' investment 1,154,535
1,156,192
Total $ 1,839,361 $
1,861,505
BRADY CORPORATION AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (Dollars in Thousands) (Unaudited) Three Months
Ended October 31, 2011 2010 Operating activities: Net income $
32,732 $ 26,281 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation and amortization
11,241 12,594 Deferred income taxes 4,399 (4,849 ) Non-cash portion
of stock-based compensation expense 3,591 4,069 Non-cash portion of
restructuring charges - 951 Changes in operating assets and
liabilities (net of effects of business acquisitions/divestitures):
Accounts receivable (7,798 ) (13,614 ) Inventories (7,156 ) (3,689
) Prepaid expenses and other assets (7,384 ) 1,078 Accounts payable
and accrued liabilities (21,814 ) (16,909 ) Income taxes 7,470
10,245 Net cash provided by operating activities
15,281 16,157 Investing activities: Purchases of property,
plant and equipment (5,817 ) (2,810 ) Settlement of net investment
hedges (958 ) - Other (233 ) (908 ) Net cash used in investing
activities (7,008 ) (3,718 ) Financing activities: Payment
of dividends (9,690 ) (9,424 ) Proceeds from issuance of common
stock 683 2,105 Purchase of treasury stock (12,309 ) - Income tax
benefit from the exercise of stock options and deferred
compensation distribution, and other 456 (146 ) Net cash
used in financing activities (20,860 ) (7,465 ) Effect of
exchange rate changes on cash (5,790 ) 6,286 Net (decrease)
increase in cash and cash equivalents (18,377 ) 11,260 Cash and
cash equivalents, beginning of period 389,971 314,840
Cash and cash equivalents, end of period $ 371,594 $
326,100 Supplemental disclosures: Cash paid during
the period for: Interest, net of capitalized interest $ 6,082 $
7,211 Income taxes, net of refunds 5,825 5,907
Information by regional segment for the three months ended October
31, 2011 and 2010 is as follows:
Corporate and (in thousands) Americas Europe
Asia-Pacific Total Region Eliminations Total
SALES TO EXTERNAL CUSTOMERS Three months ended:
October 31, 2011 $ 153,863 $
97,356 $ 98,289 $ 349,508
- $ 349,508 October 31, 2010 $
145,988 $ 92,050 $ 91,550
$ 329,588 - $ 329,588
SALES GROWTH INFORMATION Three
months ended October 31, 2011:
Base
5.7 % 3.7 % -0.2 % 3.5 %
- 3.5 % Currency
0.4 % 3.7 % 5.5 % 2.7 %
- 2.7 %
Acquisitions/Divestitures -0.7 % -1.6 %
2.1 % -0.2 % -
-0.2 % Total 5.4 % 5.8 %
7.4 % 6.0 % -
6.0 %
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/Divestitures 2.2 %
3.8 % 0.0 % 2.0 %
- 2.0 % Total 7.2 %
-2.4 % 4.1 % 3.5 %
- 3.5 %
SEGMENT PROFIT (LOSS) Three months ended:
October 31, 2011 $ 43,230 $ 26,299
$ 13,304 $ 82,833 $
(3,263 ) $ 79,570 October 31, 2010 $ 39,359
$ 24,061 $ 16,829 $
80,249 $ (3,436 ) $ 76,813 Percentage
increase (decrease) 9.8 % 9.3 %
-20.9 % 3.2 % 3.6
%
NET INCOME RECONCILIATION (in thousands)
Three months ended: October 31, October 31,
2011 2010 Total profit for reportable segments $
82,833 $ 80,249 Corporate and eliminations
(3,263 ) (3,436 ) Unallocated amounts:
Administrative costs
(30,480 ) (31,569 ) Restructuring costs
- (3,641 ) Investment and other income
(expense) (202 ) 290 Interest
expense (5,047 ) (5,687 ) Income before
income taxes 43,841 36,206
Income taxes (11,109 ) (9,925 )
Net income $ 32,732 $ 26,281
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES
(in thousands) Fiscal 2012
Q1
Q2
Q3
Q4
Total
EBITDA (1) Net income $ 32,732 $ 32,732 Interest expense 5,047
5,047 Income taxes 11,109 11,109 Depreciation and amortization
11,241
11,241 EBITDA (non-GAAP measure) $ 60,129 $ -
$ - $ - $ 60,129 Fiscal 2011
Q1
Q2
Q3
Q4
Total
EBITDA (1) Net income $ 26,281 $ 24,199 $ 28,589 $ 29,583 $ 108,652
Interest expense 5,687 5,850 5,103 5,484 22,124 Income taxes 9,925
8,205 8,607 8,669 35,406 Depreciation and amortization
12,594 12,908 12,020
11,305 48,827 EBITDA (non-GAAP measure) $
54,487 $ 51,162 $ 54,319 $ 55,041 $
215,009 (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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