- Second quarter organic revenue growth
of 1.4 percent, with 1.9 percent organic growth in Identification
Solutions and 0.6 percent organic growth in Workplace Safety.
- Non-GAAP earnings from continuing
operations* growth of 12.5 percent to $15.0 million during the
quarter ended January 31, 2015 compared to $13.4 million in the
second quarter of last year.
- Non-GAAP earnings from continuing
operations per diluted Class A Nonvoting Common Share* growth of
16.0 percent to $0.29 during the quarter ended January 31, 2015
compared to $0.25 in the same quarter of the prior year. The
current quarter was positively impacted by a lower income tax rate
due to the extension of certain U.S. tax provisions that were
passed by Congress in late December.
Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world
leader in identification solutions, today reported its financial
results for its fiscal 2015 second quarter ended January 31,
2015.
Quarter Ended January 31, 2015 Financial Results:
Sales for the quarter ended January 31, 2015 decreased 2.9
percent to $282.6 million compared to $291.2 million in the second
quarter of fiscal 2014. Total organic sales increased 1.4 percent
and foreign currency translation decreased sales by 4.3 percent. By
segment, organic sales increased 1.9 percent in Identification
Solutions and 0.6 percent in Workplace Safety.
Earnings from continuing operations for the quarter ended
January 31, 2015 were $11.6 million compared to $10.5 million in
the prior year quarter. Non-GAAP net earnings from continuing
operations* for the current quarter were $15.0 million compared to
$13.4 million in the same quarter last year.
Net earnings from continuing operations per Class A Nonvoting
Common Share were $0.23 for the quarter ended January 31, 2015
compared to $0.20 in the same quarter last year. Non-GAAP earnings
from continuing operations per diluted Class A Nonvoting Common
Share* were $0.29 in the second quarter of fiscal 2015 compared to
$0.25 per share in the second quarter of fiscal 2014.
Six-Month Period Ended January 31, 2015 Financial
Results:
Sales for the six-month period ended January 31, 2015 decreased
1.0 percent to $592.9 million compared to $598.7 million in the
same period in fiscal 2014. Organic sales increased 1.9 percent and
the impact of foreign currency translation decreased sales by 2.9
percent. By segment, organic sales increased 2.1 percent in
Identification Solutions and 1.5 percent in Workplace Safety.
Earnings from continuing operations for the six-month period
ended January 31, 2015 were $27.1 million compared to $28.7 million
in the same period in fiscal 2014. Non-GAAP net earnings from
continuing operations* for the six-month period were $33.5 million
compared to $36.2 million in the same period in fiscal 2014.
Net earnings from continuing operations per Class A Nonvoting
Common share were $0.53 for the six-month period ended January 31,
2015 compared to $0.55 in the same period in fiscal 2014. Non-GAAP
earnings from continuing operations per diluted Class A Common
Share* were $0.65 in the six-month period ended January 31, 2015
compared to $0.69 in the same period in fiscal 2014.
Commentary:
“This marks the fourth consecutive quarter of organic sales
growth for Brady Corporation and the third consecutive quarter of
organic sales growth in our Workplace Safety business. Our gross
profit margin is also stabilizing as we near completion of our
facility consolidation activities. Our gross profit margin finished
at 48.9 percent, which is a 50 basis point improvement over the
first quarter of fiscal 2015,” said Brady President and Chief
Executive Officer, J. Michael Nauman. “Although our profitability
was impacted by costs related to the consolidation of our
manufacturing facilities, the level of incremental costs is
moderating and we expect completion of these activities by the end
of fiscal 2015. We are focused on executing business fundamentals
to drive organic sales growth and improve profitability while
investing in research and development and sales resources in
selected industries, as well as building an enhanced, scalable
digital platform that will generate value for Brady and its
customers.”
“Along with our stabilizing gross profit margins, we are also
seeing benefits from our focus on controlling selling, general, and
administrative expenses, which should aid in continuing our trend
of improving financial results,” said Brady’s Chief Financial
Officer, Aaron Pearce. “As we look to the second half of fiscal
2015, we also anticipate free cash flow to improve as we
systematically reduce our inventory levels, moderate our capital
expenditures and increase profitability.”
Fiscal 2015 Guidance:
The Company anticipates low single-digit organic sales growth in
fiscal 2015, with organic sales growth in both the Identification
Solutions and Workplace Safety platforms. Brady also expects a
full-year income tax rate in the mid-to-upper 20 percent range,
approximately $15 million of restructuring charges, $40 million of
depreciation and amortization expense and capital expenditures of
approximately $35 million in fiscal 2015.
Earnings from continuing operations per diluted Class A
Nonvoting Common Share, exclusive of restructuring charges and
other non-routine charges guidance remains unchanged at $1.50 to
$1.70. However, due to the strengthening of the US dollar against
other major currencies, the Company anticipates that its full-year
fiscal 2015 results will finish at the low end of this range. This
guidance is based on current exchange rates.
A webcast regarding Brady’s fiscal 2015 second 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 people, products
and places. Brady’s products help customers increase safety,
security, productivity and performance and include high-performance
labels, signs, safety devices, printing systems and software.
Founded in 1914, the Company has a diverse customer base in
electronics, telecommunications, manufacturing, electrical,
construction, medical, aerospace and a variety of other industries.
Brady is headquartered in Milwaukee, Wisconsin and as of August 1,
2014, employed approximately 6,400 people in its worldwide
businesses. Brady’s fiscal 2014 sales were approximately $1.23
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 healthcare strategy; implementation of
the Workplace Safety strategy; future competition; risks associated
with restructuring plans; 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; technology changes and
potential security violations to the Company's information
technology system; fluctuations in currency rates versus the U.S.
dollar; risks associated with international operations;
difficulties associated with exports; Brady's ability to develop
and successfully market new products; risks associated with
identifying, completing, and integrating acquisitions; 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; risk associated with loss of
key talent; risks associated with divestitures and businesses held
for sale; risks associated with obtaining governmental approvals
and maintaining regulatory compliance; risk associated with product
liability claims; environmental, health and safety compliance costs
and liabilities; potential write-offs of Brady's substantial
intangible assets; risks associated with our ownership structure;
unforeseen tax consequences; Brady's ability to maintain compliance
with its debt covenants; increase in our level of debt; 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, 2014.
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 (Unaudited; Dollars in
thousands, except per share data) Three months ended January
31, Six months ended January 31, 2015 2014 2015 2014 Net
sales $ 282,628 $ 291,194 $ 592,868 $ 598,724 Cost of products sold
144,425 148,658 304,503
298,341 Gross margin 138,203 142,536 288,365 300,383
Operating expenses: Research and development 8,948 8,440 18,579
17,027 Selling, general and administrative 107,565 111,426 216,846
224,159 Restructuring charges 4,879 4,324
9,157 11,163 Total operating
expenses 121,392 124,190 244,582 252,349 Operating income
16,811 18,346 43,783 48,034 Other income and (expense):
Investment and other income 211 255 535 1,017 Interest expense
(3,000 ) (3,676 ) (5,891 ) (7,397 )
Earnings from continuing operations before income taxes
14,022 14,925 38,427 41,654 Income tax expense 2,438
4,408 11,344 13,002
Earnings from continuing operations $ 11,584 $ 10,517
$ 27,083 $ 28,652 Earnings (loss) from discontinued
operations, net of income taxes — 5,907
(1,915 ) 11,701 Net earnings $ 11,584
$ 16,424 $ 25,168 $ 40,353
Earnings from continuing operations per Class A Nonvoting Common
Share: Basic $ 0.23 $ 0.20 $ 0.53 $ 0.55 Diluted $ 0.23 $ 0.20 $
0.53 $ 0.55 Earnings from continuing operations per Class B
Voting Common Share: Basic $ 0.23 $ 0.20 $ 0.51 $ 0.53 Diluted $
0.23 $ 0.20 $ 0.51 $ 0.53 Earnings (loss) from discontinued
operations per Class A Nonvoting Common Share: Basic $ — $ 0.11 $
(0.04 ) $ 0.22 Diluted $ — $ 0.11 $ (0.04 ) $ 0.22 Earnings
(loss) from discontinued operations per Class B Voting Common
Share: Basic $ — $ 0.11 $ (0.03 ) $ 0.23 Diluted $ — $ 0.11 $ (0.04
) $ 0.22 Net earnings per Class A Nonvoting Common Share:
Basic $ 0.23 $ 0.31 $ 0.49 $ 0.77 Diluted $ 0.23 $ 0.31 $ 0.49 $
0.77 Dividends $ 0.20 $ 0.195 $ 0.40 $ 0.39 Net earnings per
Class B Voting Common Share: Basic $ 0.23 $ 0.31 $ 0.48 $ 0.76
Diluted $ 0.23 $ 0.31 $ 0.47 $ 0.75 Dividends $ 0.20 $ 0.195 $
0.383 $ 0.373 Weighted average common shares outstanding (in
thousands): Basic 51,272 52,208 51,262 52,140 Diluted 51,348 52,494
51,330 52,457 BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited; Dollars in thousands)
January 31, 2015 July 31, 2014
ASSETS
Current assets:
Cash and cash equivalents
$ 93,299 $ 81,834 Accounts receivable—net 151,426 177,648
Inventories: Finished products 70,974 73,096 Work-in-process 19,315
17,689 Raw materials and supplies 26,649
22,490 Total inventories 116,938 113,275 Assets held for
sale — 49,542 Prepaid expenses and other current assets
43,953 41,543
Total current assets
405,616 463,842
Other assets: Goodwill 478,991 515,004 Other
intangible assets 81,526 91,014 Deferred income taxes 19,293 27,320
Other 20,775 22,314
Property, plant and equipment: Cost:
Land 5,924 7,875 Buildings and improvements 97,729 101,866
Machinery and equipment 283,773 288,409 Construction in progress
8,508 12,500 395,934 410,650 Less
accumulated depreciation 266,680 276,479
Property, plant and equipment—net 129,254
134,171
Total $ 1,135,455 $
1,253,665
LIABILITIES AND
STOCKHOLDERS’ INVESTMENT
Current liabilities: Notes payable $ 90,850 $ 61,422
Accounts payable 74,154 88,099 Wages and amounts withheld from
employees 32,535 38,064 Liabilities held for sale — 10,640 Taxes,
other than income taxes 5,928 7,994 Accrued income taxes 1,549
7,893 Other current liabilities 32,935 35,319 Current maturities on
long-term debt 42,514 42,514
Total
current liabilities 280,465 291,945
Long-term obligations,
less current maturities 143,778 159,296
Other
liabilities 65,652 69,348
Total
liabilities 489,895 520,589
Stockholders’ investment:
Common stock: Class A nonvoting common stock—Issued 51,261,487 and
51,261,487 shares, respectively and outstanding 47,748,984 and
47,704,196 shares, respectively 513 513 Class B voting common
stock—Issued and outstanding, 3,538,628 shares 35 35 Additional
paid-in capital 312,819 311,811 Earnings retained in the business
456,777 452,057 Treasury stock—3,512,503 and 3,477,291 shares,
respectively of Class A nonvoting
common stock, at cost
(94,089 ) (93,337 ) Accumulated other comprehensive (loss) income
(27,569 ) 64,156 Other (2,926 ) (2,159 )
Total
stockholders’ investment 645,560 733,076
Total $ 1,135,455 $ 1,253,665
BRADY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS
OF CASH FLOWS (Unaudited; Dollars in thousands) Six months
ended January 31, 2015 2014 Operating activities: Net earnings $
25,168 $ 40,353 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation and amortization
20,066 22,342 Non-cash portion of stock-based compensation expense
2,471 4,377 Non-cash portion of restructuring charges 896 97 Loss
on sale of business, net 426 — Deferred income taxes (781 ) (2,402
) Changes in operating assets and liabilities (net of effects of
business acquisitions/divestitures): Accounts receivable 10,918
(1,418 ) Inventories (10,840 ) (8,754 ) Prepaid expenses and other
assets (3,053 ) (3,505 ) Accounts payable and accrued liabilities
(15,423 ) (7,263 ) Income taxes (5,918 ) (2,050 ) Net
cash provided by operating activities 23,930 41,777
Investing activities: Purchases of property, plant and equipment
(17,808 ) (17,607 ) Sale of business, net of cash retained 6,111 —
Other 4,173 89 Net cash used in
investing activities (7,524 ) (17,518 ) Financing
activities: Payment of dividends (20,449 ) (20,370 ) Proceeds from
issuance of common stock 847 10,894 Proceeds from borrowing on
notes payable 47,818 3,187 Repayment of borrowing on notes payable
(18,390 ) (30,000 ) Income tax on the exercise of stock options and
deferred compensation distributions, and other (3,830 )
(984 ) Net cash provided by (used in) financing activities
5,996 (37,273 ) Effect of exchange rate changes on cash
(10,937 ) 1,072 Net increase (decrease) in cash and cash
equivalents 11,465 (11,942 ) Cash and cash equivalents, beginning
of period 81,834 91,058 Cash and
cash equivalents, end of period $ 93,299 $ 79,116
Supplemental disclosures: Cash paid during the period for:
Interest $ 6,146 $ 7,283 Income taxes, net of refunds 15,727 14,083
BRADY CORPORATION AND
SUBSIDIARIES SEGMENT INFORMATION (Unaudited; Dollars in
thousands) Three Months Ended January 31, Six Months Ended
January 31, 2015 2014 2015 2014
SALES TO EXTERNAL CUSTOMERS
ID Solutions $ 192,065 $ 194,732 $ 404,162 $ 404,278 Workplace
Safety 90,563 96,462 188,706
194,446 Total $ 282,628 $ 291,194
$ 592,868 $ 598,724
SALES
INFORMATION ID Solutions
Organic
1.9 % 2.5 % 2.1 % 2.9 % Currency (3.3 )% (0.5 )% (2.1 )% (0.4 )%
Acquisitions — % 13.8 % — % 19.8 %
Total (1.4 )% 15.8 % — % 22.3 %
Workplace Safety Organic 0.6 % (6.8 )% 1.5 % (8.4 )%
Currency (6.7 )% (0.9 )% (4.5 )% (0.8 )% Acquisitions — %
— % — % — % Total (6.1 )% (7.7
)% (3.0 )% (9.2 )%
Total Company Organic 1.4 %
(1.1 )% 1.9 % (1.6 )% Currency (4.3 )% (0.6 )% (2.9 )% (0.5 )%
Acquisitions — % 8.5 % — % 12.0 % Total
(2.9 )% 6.8 % (1.0 )% 9.9 %
SEGMENT PROFIT ID Solutions $ 35,719 $ 37,526 $ 79,186 $
88,493 Workplace Safety 12,776 14,668
28,315 33,042 Total $
48,495 $ 52,194 $ 107,501 $
121,535
SEGMENT PROFIT AS A PERCENT OF SALES ID
Solutions 18.6 % 19.3 % 19.6 % 21.9 % Workplace Safety 14.1
% 15.2 % 15.0 % 17.0 % Total 17.2 %
17.9 % 18.1 % 20.3 % Three
Months Ended January 31, Six Months Ended January 31, 2015 2014
2015 2014 Total segment profit $ 48,495 $ 52,194 $ 107,501 $
121,535 Unallocated amounts: Administrative costs (26,805 ) (29,524
) (54,561 ) (62,338 ) Restructuring charges (4,879 ) (4,324 )
(9,157 ) (11,163 ) Investment and other income 211 255 535 1,017
Interest expense (3,000 ) (3,676 ) (5,891 )
(7,397 ) Earnings from continuing operations before income
taxes $ 14,022 $ 14,925 $ 38,427 $ 41,654
GAAP to
NON-GAAP MEASURES (Unaudited; 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 January 31, Six Months Ended
January 31, 2015 2014 2015 2014
Earnings from Continuing
Operations Before Income Taxes (GAAP measure) $ 14,022 $ 14,925
$ 38,427 $ 41,654 Restructuring charges 4,879 4,324 9,157 11,163
Earnings from Continuing Operations
Before Income Taxes Excluding Certain Items (non-GAAP
measure)
$ 18,901 $ 19,249 $
47,584 $ 52,817 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 January
31, Six Months Ended January 31, 2015 2014 2015 2014
Income
Taxes on Continuing Operations (GAAP measure) $ 2,438 $ 4,408 $
11,344 $ 13,002 Restructuring charges 1,434 1,481 2,770 3,611
Income Taxes on Continuing Operations
Excluding Certain Items (non-GAAP measure)
$ 3,872 $ 5,889 $ 14,114
$ 16,613 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 January 31, Six Months Ended January 31, 2015 2014 2015 2014
Net Earnings from Continuing Operations (GAAP measure) $
11,584 $ 10,517 $ 27,083 $ 28,652 Restructuring charges 3,445 2,843
6,387 7,552
Net Earnings from Continuing Operations
Excluding Certain Items (non-GAAP measure)
$ 15,029 $ 13,360 $
33,470 $ 36,204 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. 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 January 31, Six Months Ended January 31, 2015 2014 2015 2014
Net Earnings from Continuing Operations
Per Diluted Class A Nonvoting Common Share (GAAP measure)
$ 0.23 $ 0.20 $ 0.53 $ 0.55 Restructuring charges 0.07 0.05 0.12
0.14
Net Earnings from Continuing Operations
Per Diluted Class A Nonvoting Common Share Excluding Certain Items
(non-GAAP measure)
$ 0.29 $ 0.25 $ 0.65
$ 0.69
Brady CorporationInvestor contact:Ann Thornton,
414-438-6887orMedia contact:Carole Herbstreit, 414-438-6882
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