BRC Brady Corp

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.