BRC Brady Corp

Brady Corporation (NYSE: BRC):

• Third quarter organic revenue growth was 2.5 percent.
• GAAP earnings from continuing operations per diluted Class A Nonvoting Common Share were $0.39 in the third quarter of fiscal 2014 compared to $0.42 in the same quarter of the prior year. Non-GAAP earnings from continuing operations per diluted Class A Nonvoting Common Share* were $0.43 during the third quarter ended April 30, 2014 compared to $0.55 in the same quarter of the prior year.
• Brady repurchased approximately 893,000 shares in the third quarter for a total of $23.3 million.
• On May 1, 2014, Brady received $53 million of cash in connection with the completion of the first phase of the divestiture of the die-cut business.

Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for the fiscal 2014 third quarter ended April 30, 2014.

Quarter Ended April 30, 2014 Financial Results:

Sales from continuing operations for the quarter ended April 30, 2014 increased 2.3 percent to $309.6 million compared to the third quarter of fiscal 2013. Total organic sales increased 2.5 percent.

Net earnings from continuing operations for the quarter ended April 30, 2014 were $20.2 million compared to $21.7 million in the same quarter last year. The income tax rate on continuing operations in the third quarter of fiscal 2014 was approximately 16.8 percent compared to 22.4 percent in the third quarter of fiscal 2013. Non-GAAP net earnings from continuing operations* for the fiscal 2014 third quarter ended April 30, 2014, were $22.3 million compared to $28.5 million in the same quarter last year.

Net earnings from continuing operations per Class A Nonvoting Common Share were $0.39 for the third quarter ended April 30, 2014 compared to $0.42 in the same quarter last year. Non-GAAP earnings from continuing operations per diluted Class A Nonvoting Common Share* were $0.43 in the third quarter of fiscal 2014 and $0.55 per share in the third quarter of fiscal 2013.

Nine-Month Period Ended April 30, 2014 Financial Results:

Sales from continuing operations for the nine-month period ended April 30, 2014 were up 7.2 percent to $908.3 million. Organic sales were down 0.1 percent. By segment, organic sales were up 3.6 percent in Identification Solutions and down 6.3 percent in Workplace Safety.

Net earnings from continuing operations for the nine-month period ended April 30, 2014, were $48.8 million compared to $37.3 million in the same nine-month period last year. Non-GAAP net earnings from continuing operations* for the nine-month period ended April 30, 2014, were $58.5 million compared to $74.7 million in the same nine-month period last year.

Net earnings from continuing operations per Class A Nonvoting Common Share were $0.93 for the nine-month period ended April 30, 2014 compared to $0.72 in the same nine-month period last year. Non-GAAP earnings from continuing operations per diluted Class A Nonvoting Common Share* were $1.12 in the nine-month period ended April 30, 2014 and $1.44 per share in the same period of the previous fiscal year.

Commentary and Guidance:

“We were encouraged by our revenue growth in the third quarter. We believe that our investments to drive organic growth are paying off as organic sales grew 2.5 percent this quarter. Organic sales were up 4.8 percent in Identification Solutions and down 1.9 percent in Workplace Safety this quarter. This 1.9 percent decline in our Workplace Safety business is a much smaller rate of decline compared to previous quarters as we continue to add new customers, increase revenues over the internet and have recently returned our catalog advertising to historical levels,” said Brady’s Chief Financial Officer and Interim President and Chief Executive Officer, Thomas J. Felmer. “Our strong balance sheet enabled us to repurchase approximately 893,000 shares of Brady’s stock at an average price of $26.14 per share during the quarter ended April 30, 2014 and on May 1, 2014, we received $53 million of cash as we completed the first phase of our Die-Cut divestiture, closing on the sale of businesses in Germany, Thailand, Korea and Malaysia.”

Felmer continued, “We anticipate low single-digit organic sales growth from continuing operations in the fourth quarter of fiscal 2014 and we expect net earnings from continuing operations per diluted Class A Nonvoting Common Share to range from $0.45 to $0.55, exclusive of restructuring charges and certain other items.”

A webcast regarding Brady’s fiscal 2014 third quarter financial results will be available at www.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, signs, safety devices, printing systems and software, and precision die-cut materials. Founded in 1914, the company has a diverse customer base in electronics, telecommunications, manufacturing, electrical, construction, education, medical and a variety of other industries. Brady is headquartered in Milwaukee, Wisconsin and as of July 31, 2013, employed approximately 7,400 people in its worldwide businesses. Brady’s fiscal 2013 sales were approximately $1.15 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.

* See accompanying notes for non-GAAP measures.

In this news release, statements that are not reported financial results or other historic information are “forward-looking statements.” These forward-looking statements relate to, among other things, the Company'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.

The use of 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: Implementation of the Workplace Safety strategy; 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, hard disk drive, manufacturing, electrical, construction, laboratory, education, governmental, public utility, computer, healthcare and transportation; future competition; changes in the supply of, or price for, parts and components; increased price pressure from suppliers and customers; Brady's ability to retain significant contracts and customers; fluctuations in currency rates versus the U.S. dollar; risks associated with international operations; difficulties associated with exports; risks associated with obtaining governmental approvals and maintaining regulatory compliance; Brady's ability to develop and successfully market new products; risks associated with identifying, completing, and integrating acquisitions; risks associated with divestitures and businesses held for sale; risks associated with restructuring plans; environmental, health and safety compliance costs and liabilities; risk associated with loss of key talent; risk associated with product liability claims; technology changes and potential security violations to the Company's information technology systems; Brady's ability to maintain compliance with its debt covenants; increase in our level of debt; potential write-offs of Brady's substantial intangible assets; unforeseen tax consequences; risk, associated with our ownership structure; 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 within Item 1A of Part I of Brady’s Form 10-K for the year ended July 31, 2013.

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 except as required by law.

        BRADY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Dollars in thousands, except per share data)   (Unaudited)   (Unaudited) Three months ended April 30, Nine months ended April 30, 2014 2013 2014 2013 Net sales $ 309,577 $ 302,483 $ 908,301 $ 847,200 Cost of products sold   154,457     143,082     452,797     395,723   Gross margin 155,120 159,401 455,504 451,477 Operating expenses: Research and development 8,648 8,062 25,675 24,162 Selling, general and administrative 116,666 111,864 340,825 320,874 Restructuring charges   3,039     8,540     14,202     10,473   Total operating expenses 128,353 128,466 380,702 355,509   Operating income 26,767 30,935 74,802 95,968   Other income and (expense): Investment and other income 872 1,133 1,887 2,427 Interest expense   (3,381 )   (4,186 )   (10,777 )   (12,755 )   Earnings from continuing operations before income taxes 24,258 27,882 65,912 85,640   Income tax expense   4,074     6,202     17,077     48,340     Earnings from continuing operations $ 20,184 $ 21,680 $ 48,835 $ 37,300   Earnings (loss) from discontinued operations, net of income taxes   3,904     (17,447 )   15,606     (14,564 )   Net earnings $ 24,088   $ 4,233   $ 64,441   $ 22,736     Earnings from continuing operations per Class A Nonvoting Common Share: Basic $ 0.39 $ 0.42 $ 0.94 $ 0.72 Diluted $ 0.39 $ 0.42 $ 0.93 $ 0.72   Earnings from continuing operations per Class B Voting Common Share: Basic $ 0.39 $ 0.42 $ 0.92 $ 0.71 Diluted $ 0.39 $ 0.42 $ 0.92 $ 0.70   Earnings (loss) from discontinued operations per Class A Nonvoting Common Share: Basic $ 0.07 $ (0.34 ) $ 0.30 $ (0.28 ) Diluted $ 0.07 $ (0.34 ) $ 0.30 $ (0.28 )   Earnings (loss) from discontinued operations per Class B Voting Common Share: Basic $ 0.07 $ (0.34 ) $ 0.30 $ (0.29 ) Diluted $ 0.07 $ (0.34 ) $ 0.29 $ (0.28 )   Net earnings per Class A Nonvoting Common Share: Basic $ 0.46 $ 0.08 $ 1.24 $ 0.44 Diluted $ 0.46 $ 0.08 $ 1.23 $ 0.44 Dividends $ 0.195 $ 0.19 $ 0.585 $ 0.57   Net earnings per Class B Voting Common Share: Basic $ 0.46 $ 0.08 $ 1.22 $ 0.42 Diluted $ 0.46 $ 0.08 $ 1.21 $ 0.42 Dividends $ 0.195 $ 0.19 $ 0.568 $ 0.553   Weighted average common shares outstanding (in thousands): Basic 51,933 51,415 52,071 51,210 Diluted 52,000 52,041 52,304 51,685     BRADY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (Unaudited) April 30, 2014 July 31, 2013

ASSETS

Current assets: Cash and cash equivalents $ 78,715 $ 91,058 Accounts receivable—net 178,197 169,261 Inventories: Finished products 71,397 64,544 Work-in-process 17,099 14,776 Raw materials and supplies   20,873     15,387   Total inventories 109,369 94,707 Assets held for sale 109,540 119,864 Prepaid expenses and other current assets   46,661     37,600   Total current assets 522,482 512,490 Other assets: Goodwill 620,998 617,236 Other intangible assets 142,846 156,851 Deferred income taxes 12,361 8,623 Other 22,760 21,325 Property, plant and equipment: Cost: Land 7,917 7,861 Buildings and improvements 97,600 91,471 Machinery and equipment 284,905 266,787 Construction in progress   11,595     11,842   402,017 377,961 Less accumulated depreciation   271,790     255,803   Property, plant and equipment—net   130,227     122,158   Total $ 1,451,674   $ 1,438,683  

LIABILITIES AND STOCKHOLDERS’ INVESTMENT

Current liabilities: Notes payable $ 75,552 $ 50,613 Accounts payable 87,528 82,519 Wages and amounts withheld from employees 44,742 42,413 Liabilities held for sale 24,536 34,583 Taxes, other than income taxes 8,409 8,243 Accrued income taxes 10,808 7,056 Other current liabilities 31,628 36,806 Current maturities on long-term debt   61,264     61,264   Total current liabilities 344,467 323,497 Long-term obligations, less current maturities 162,468 201,150 Other liabilities   80,742     83,239   Total liabilities 587,677 607,886 Stockholders’ investment: Common stock: Class A nonvoting common stock—Issued 51,261,487 and 51,261,487 shares, respectively and outstanding 47,935,602 and 48,408,544 shares, respectively 513 513 Class B voting common stock—Issued and outstanding, 3,538,628 shares 35 35 Additional paid-in capital 314,625 306,191 Earnings retained in the business 572,474 538,512

Treasury stock—3,245,885 and 2,626,276 shares, respectively of Class A nonvoting common stock, at cost

(87,682 ) (69,797 ) Accumulated other comprehensive income 63,687 56,063 Other   345     (720 ) Total stockholders’ investment   863,997     830,797   Total $ 1,451,674   $ 1,438,683       BRADY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited) Nine months ended April 30, 2014 2013 Operating activities: Net earnings $ 64,441 $ 22,736 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 33,782 36,037 Non-cash portion of stock-based compensation expense 5,033 6,964 Non-cash portion of restructuring charges 267 3,701 Loss on write-down of assets held for sale — 15,658 Loss on sales of businesses — 3,138 Deferred income taxes (8,310 ) 33,780 Changes in operating assets and liabilities (net of effects of business acquisitions/divestitures): Accounts receivable 2,949 (6,410 ) Inventories (9,435 ) (91 ) Prepaid expenses and other assets (2,772 ) 541 Accounts payable and accrued liabilities (13,027 ) (22,226 ) Income taxes   2,912     (4,198 ) Net cash provided by operating activities 75,840 89,630   Investing activities: Purchases of property, plant and equipment (29,808 ) (26,082 ) Acquisition of business, net of cash acquired — (301,157 ) Sales of businesses, net of cash retained — 10,178 Other   (647 )   (1,245 ) Net cash used in investing activities (30,455 ) (318,306 )   Financing activities: Payment of dividends (30,479 ) (29,344 ) Proceeds from issuance of common stock 10,894 10,246 Purchase of treasury stock (23,335 ) (5,121 ) Proceeds from borrowing on notes payable 63,000 220,000 Repayment of borrowing on notes payable (39,000 ) (173,000 ) Proceeds from borrowings on line of credit 3,187 11,491 Repayment of borrowing on line of credit (2,401 ) — Principal payments on debt (42,514 ) (42,514 ) Income tax on the exercise of stock options and deferred compensation distributions, and other   (978 )   1,794   Net cash used in financing activities (61,626 ) (6,448 )   Effect of exchange rate changes on cash 3,898 6,258   Net decrease in cash and cash equivalents (12,343 ) (228,866 ) Cash and cash equivalents, beginning of period   91,058     305,900     Cash and cash equivalents, end of period $ 78,715   $ 77,034     Supplemental disclosures: Cash paid during the period for: Interest, net of capitalized interest $ 11,417 $ 13,194 Income taxes, net of refunds 18,842 26,786 Acquisitions: Fair value of assets acquired, net of cash — $ 169,830 Liabilities assumed — (57,860 ) Goodwill   —     189,187   Net cash paid for acquisitions   —   $ 301,157           BRADY CORPORATION AND SUBSIDIARIES SEGMENT INFORMATION (Dollars in Thousands)   Three Months Ended April 30 Nine Months Ended April 30 2014 2013 2014 2013 SALES TO EXTERNAL CUSTOMERS ID Solutions $ 206,448 $ 197,417 $ 610,726 $ 528,044 Workplace Safety   103,129     105,066     297,575     319,156   Total $ 309,577   $ 302,483   $ 908,301   $ 847,200     SALES INFORMATION ID Solutions Organic 4.8 % (1.9 )% 3.6 % 0.3 % Currency (0.2 )% (1.0 )% (0.3 )% (1.4 )% Acquisitions   — %   25.3 %   12.4 %   12.2 % Total   4.6 %   22.4 %   15.7 %   11.1 % Workplace Safety Organic (1.9 )% (9.0 )% (6.3 )% (6.4 )% Currency 0.1 % (1.1 )% (0.5 )% (1.0 )% Acquisitions   — %   5.0 %   — %   5.3 % Total   (1.8 )%   (5.1 )%   (6.8 )%   (2.1 )% Total Company Organic 2.5 % (4.8 )% (0.1 )% (2.5 )% Currency (0.2 )% (1.0 )% (0.4 )% (1.2 )% Acquisitions   — %   17.0 %   7.7 %   9.4 % Total   2.3 %   11.2 %   7.2 %   5.7 %   SEGMENT PROFIT ID Solutions $ 44,302 $ 46,787 $ 132,795 $ 126,011 Workplace Safety   14,771       23,453     47,813       74,881   Total $ 59,073     $ 70,240   $ 180,608     $ 200,892   SEGMENT PROFIT AS A PERCENT OF SALES ID Solutions 21.5 % 23.7 % 21.7 % 23.9 % Workplace Safety   14.3 %   22.3 %   16.1 %   23.5 % Total   19.1 %   23.2 %   19.9 %   23.7 %     Three Months Ended April 30, Nine Months Ended April 30, 2014 2013 2014 2013 Total segment profit $ 59,073 $ 70,240 $ 180,608 $ 200,892 Unallocated amounts: Administrative costs (29,267 ) (30,765 ) (91,604 ) (94,451 ) Restructuring charges (3,039 ) (8,540 ) (14,202 ) (10,473 ) Investment and other income 872 1,133 1,887 2,427 Interest expense   (3,381 )   (4,186 )   (10,777 )   (12,755 ) Earnings from continuing operations before income taxes $ 24,258   $ 27,882   $ 65,912   $ 85,640             GAAP to NON-GAAP MEASURES (Dollars in Thousands, Except Per Share Amounts)     In accordance with the U.S. Securities and Exchange Commission’s Regulation G, the following provides definitions of the non-GAAP measures used in the earnings release and the reconciliation to the most closely related GAAP measure.       Earnings from Continuing Operations Before Income Taxes Excluding Certain Items: Brady is presenting the Non-GAAP measure "Earnings from Continuing Operations Before Income Taxes Excluding Certain Items." This is not a calculation based upon GAAP. The amounts included in this Non-GAAP measure are derived from amounts included in the Consolidated Financial Statements and supporting footnote disclosures. We do not view these items to be part of our sustainable results. We believe this profit measure provides an important perspective of underlying business trends and results and provides a more comparable measure from year to year. The table below provides a reconciliation of Earnings from Continuing Operations Before Income Taxes to Earnings from Continuing Operations Before Income Taxes Excluding Certain Items:         Three Months Ended April 30, Nine Months Ended April 30, 2014 2013 2014 2013 Earnings from Continuing Operations Before Income Taxes (GAAP measure) $ 24,258 $ 27,882 $ 65,912 $ 85,640 Cost of goods sold: Purchase accounting expense related to inventory — — — 1,530 Selling, general and administrative: PDC acquisition-related expenses — — — 3,600 Restructuring charges 3,039 8,540 14,202 10,473 Non-cash income tax charges related to PDC funding   —   —   —   —  

Earnings from Continuing Operations Before Income Taxes Excluding Certain Items (non-GAAP measure)

$ 27,297 $ 36,422 $ 80,114 $ 101,243       Income Taxes on Continuing Operations Excluding Certain Items: Brady is presenting the Non-GAAP measure "Income Taxes on Continuing Operations Excluding Certain Items." This is not a calculation based upon GAAP. The amounts included in this Non-GAAP measure are derived from amounts included in the Consolidated Financial Statements and supporting footnote disclosures. We do not view these items to be part of our sustainable results. We believe this measure provides an important perspective of underlying business trends and results and provides a more comparable measure from year to year. The table below provides a reconciliation of Income Taxes on Continuing Operations to Income Taxes on Continuing Operations Excluding Certain Items:         Three Months Ended April 30, Nine Months Ended April 30, 2014 2013 2014 2013 Income Taxes on Continuing Operations (GAAP measure) $ 4,074 $ 6,202 $ 17,077 $ 48,340 Cost of goods sold: Purchase accounting expense related to inventory — — — 581 Selling, general and administrative: PDC acquisition-related expenses — — — 641 Restructuring charges 968 1,691 4,584 2,000 Non-cash income tax charges related to PDC funding   —   —   —   (25,000 )

Income Taxes on Continuing Operations Excluding Certain Items (non-GAAP measure)

$ 5,042 $ 7,893 $ 21,661 $ 26,562       Net Earnings from Continuing Operations Excluding Certain Items: Brady is presenting the Non-GAAP measure "Net Earnings from Continuing Operations Excluding Certain Items." This is not a calculation based upon GAAP. The amounts included in this Non-GAAP measure are derived from amounts included in the Consolidated Financial Statements and supporting footnote disclosures. We do not view these items to be part of our sustainable results. We believe this measure provides an important perspective of underlying business trends and results and provides a more comparable measure from year to year. The table below provides a reconciliation of Net Earnings from Continuing Operations to Net Earnings from Continuing Operations Excluding Certain Items:         Three Months Ended April 30, Nine Months Ended April 30, 2014 2013 2014 2013 Net Earnings from Continuing Operations (GAAP measure) $ 20,184 $ 21,680 $ 48,835 $ 37,300 Cost of goods sold: Purchase accounting expense related to inventory — — — 949 Selling, general and administrative: PDC acquisition-related expenses — — — 2,959 Restructuring charges 2,071 6,849 9,618 8,473 Non-cash income tax charges related to PDC funding   —   —   —   25,000  

Net Earnings from Continuing Operations Excluding Certain Items (non- GAAP measure)

$ 22,255 $ 28,529 $ 58,453 $ 74,681       Net Earnings from Continuing Operations Per Diluted Class A Nonvoting Common Share Excluding Certain Items: Brady is presenting the Non-GAAP measure "Net Earnings from Continuing Operations Per Diluted Class A Nonvoting Common Share Excluding Certain Items." This is not a calculation based upon GAAP. The amounts included in this Non-GAAP measure are derived from amounts included in the Consolidated Financial Statements and supporting footnote disclosures. We do not view these items to be part of our sustainable results. We believe this measure provides an important perspective of underlying business trends and results and provides a more comparable measure from year to year. The table below provides a reconciliation of Net Earnings from Continuing Operations Per Diluted Class A Nonvoting Common Share to Net Earnings from Continuing Operations Per Diluted Class A Nonvoting Common Share Excluding Certain Items:           Three Months Ended April 30, Nine Months Ended April 30, 2014 2013 2014 2013 Net Earnings from Continuing Operations Per Diluted Class A $ 0.39 $ 0.42 $ 0.93 $ 0.72 Nonvoting Common Share (GAAP measure) Cost of goods sold: Purchase accounting expense related to inventory — — — 0.02 Selling, general and administrative: PDC acquisition-related expenses — — — 0.06 Restructuring charges 0.04 0.13 0.18 0.16 Non-cash income tax charges related to PDC funding — — — 0.48 Net Earnings from Continuing Operations Per Diluted Class A Nonvoting Common Share Excluding Certain Items (non-GAAP measure) $ 0.43 $ 0.55 $ 1.12 $ 1.44  

Brady CorporationInvestor contact:Aaron Pearce 414-438-6895orMedia contact:Carole Herbstreit 414-438-6882