MILWAUKEE, May 16, 2007--Brady Corporation (NYSE: BRC), a world leader in identification solutions, today announced sales and earnings for its fiscal 2007 third quarter ended April 30, 2007.
Sales for the quarter were $346.3 million, up 30 percent compared to sales of $266.5 million in the third quarter last year. Organic sales were up 1 percent over the prior year, acquisitions contributed 24 percent to sales growth, and currency exchange added 5 percent to sales results in the quarter.
Net income for the quarter was down 4 percent to $29.0 million compared to $30.2 million in the same quarter last year. Earnings per diluted Class A Common Share were $0.53, down 13 percent compared to $0.61 in the fiscal 2006 third quarter. Fiscal 2007 earnings per share results include the effect of issuance of an additional 4.6 million shares through an equity offering in the fourth quarter of fiscal 2006 that reduced earnings per share by $0.05.
Sales for the nine months ended April 30, 2007, rose 37 percent to $999.9 million compared to $730.1 million in the same period last year. Net income for the nine-month period was $83.1 million, up 2 percent compared to $81.7 million in the prior year. Nine-month earnings per share were $1.52 , down 7 percent compared to $1.64 per share in the period last year.
Pre-tax charges to the income statement of $2.7 million for the quarter and $3.9 million for the nine- month period were taken for cost reduction actions. In addition, in connection with planned integration activities of acquisitions completed in the last 12 months, the company incurred severance and other charges of $6.6 million for the quarter and $8.2 million for the nine-month period that increased goodwill. Pre-tax savings from these actions are expected to be approximately $10 million in fiscal 2008.
"We are pleased with the swift actions taken in the quarter to streamline our business and best fit the needs of our customers around the world. While it is still too early to see the results from these actions, we believe we are making the right adjustments to our cost structure," said Brady President and Chief Executive Officer Frank M. Jaehnert.
"Our results this quarter clearly demonstrate the benefits of geographic diversification. While the economy is slowing in the Americas and sales in Asia-Pacific were down primarily due to challenges in the OEM electronics business, strong organic growth in Europe due in part to new non-smoking legislation offset the other regions," said Brady Chief Financial Officer David Mathieson. "Today we also reaffirm our previous guidance for fiscal 2007 sales of between $1.35 and $1.37 billion, net income of between $113 and $118 million, and diluted earnings per share between $2.06 and $2.15. "
A webcast of a conference call regarding the company's fiscal 2007 third quarter results will be available at www.investor.bradycorp.com beginning at 7:00 a.m. Central Time tomorrow.
Brady Corporation is an international manufacturer and marketer of complete solutions that identify and protect premises, products and people. Its 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 500,000 customers in electronics, telecommunications, manufacturing, electrical, construction, education, medical and a variety of other industries. Brady is headquartered in Milwaukee and employs more than 9,000 people at operations in the Americas, Europe and Asia/Pacific. Brady's fiscal 2006 sales were approximately $1.018 billion.
More information is available on the Internet at www.bradycorp.com.
Information by regional segment for the three and nine months ended
April 30, 2007 and 2006 is as follows:
----------------------------------------------------------------------
Corporate
and
Elimi-
(in Thousands) Americas Europe Asia Subtotals nations Total
----------------------------------------------------------------------
SALES TO
EXTERNAL
CUSTOMERS
----------------------------------------------------------------------
Three months
ended:
----------------------------------------------------------------------
April 30, 2007 $153,861 $111,266 $81,205 $346,332 - $346,332
----------------------------------------------------------------------
April 30, 2006 137,438 80,420 48,636 266,494 - 266,494
----------------------------------------------------------------------
----------------------------------------------------------------------
Nine months
ended:
----------------------------------------------------------------------
April 30, 2007 $440,792 $302,478 $256,596 $999,866 - $999,866
----------------------------------------------------------------------
April 30, 2006 363,446 230,466 136,191 730,103 - 730,103
----------------------------------------------------------------------
----------------------------------------------------------------------
SALES GROWTH
INFORMATION
----------------------------------------------------------------------
Three months
ended April 30,
2007:
----------------------------------------------------------------------
Base 0.4% 10.1% -10.1% 1.4% - 1.4%
----------------------------------------------------------------------
Currency 0.1% 12.2% 5.7% 4.8% - 4.8%
----------------------------------------------------------------------
Acquisitions 11.5% 16.1% 71.4% 23.8% - 23.8%
----------------------------------------------------------------------
Total 12.0% 38.4% 67.0% 30.0% - 30.0%
----------------------------------------------------------------------
----------------------------------------------------------------------
Nine months
ended April 30,
2007:
----------------------------------------------------------------------
Base 2.7% 8.2% -0.7% 3.8% - 3.8%
----------------------------------------------------------------------
Currency 0.4% 9.5% 4.4% 4.0% - 4.0%
----------------------------------------------------------------------
Acquisitions 18.2% 13.6% 84.7% 29.1% - 29.1%
----------------------------------------------------------------------
Total 21.3% 31.3% 88.4% 36.9% - 36.9%
----------------------------------------------------------------------
----------------------------------------------------------------------
SEGMENT PROFIT
(LOSS)
----------------------------------------------------------------------
Three months
ended:
----------------------------------------------------------------------
April 30, 2007 $37,465 $29,370 $11,861 $78,696 ($1,310) $77,386
----------------------------------------------------------------------
April 30, 2006 35,026 21,304 12,397 68,727 (2,724) 66,003
----------------------------------------------------------------------
Percentage
increase
(decrease) 7.0% 37.9% -4.3% 14.5% -51.9% 17.2%
----------------------------------------------------------------------
Nine months
ended:
----------------------------------------------------------------------
April 30, 2007 $103,163 $74,978 $46,391 $224,532 ($5,733)$218,799
----------------------------------------------------------------------
April 30, 2006 92,188 62,071 37,124 191,383 (7,741) 183,642
----------------------------------------------------------------------
Percentage
increase
(decrease) 11.9% 20.8% 25.0% 17.3% -25.9% 19.1%
----------------------------------------------------------------------
NET INCOME RECONCILIATION (in thousands)
-------------------------------------------------------
Three months ended: Nine months ended:
-------------------------------------------------------
April 30, April 30, April 30, April 30,
2007 2006 2007 2006
-------------------------------------------------------
Total profit for
reportable
segments $78,696 $68,727 $224,532 $191,383
-------------------------------------------------------
Corporate and
eliminations (1,310) (2,724) (5,733) (7,741)
-------------------------------------------------------
Unallocated
amounts:
-------------------------------------------------------
Administrative
costs (31,083) (21,777) (87,831) (64,011)
-------------------------------------------------------
Investment and
other income 385 2,279 917 2,759
-------------------------------------------------------
Interest
expense (6,428) (4,496) (16,407) (8,920)
-------------------------------------------------------
Income before
income taxes 40,260 42,009 115,478 113,470
-------------------------------------------------------
Income taxes (11,273) (11,763) (32,334) (31,772)
-------------------------------------------------------
Net income $28,987 $30,246 $83,144 $81,698
----------------=======================================
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 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 retain significant contracts and customers; future competition; 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; interruptions to sources of supply; environmental, health and safety compliance costs and liabilities; Brady's ability to realize cost savings from operating initiatives; Brady's ability to attract and retain key talent; difficulties associated with exports; risks associated with international operations; fluctuations in currency rates versus the US dollar; technology changes; potential write-offs of Brady's substantial intangible assets; risks associated with obtaining governmental approvals and maintaining regulatory compliance for new and existing products; business interruptions due to implementing business systems; 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 II of Brady's Annual Report on Form 10-K for the period ended July 31, 2006. 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 April 30,
---------------------------------
Percentage
2007 2006 Change
---------- ---------- ----------
Net sales $ 346,332 $ 266,494 30.0%
Cost of products sold 177,181 125,739 40.9%
---------- ----------
Gross margin 169,151 140,755 20.2%
Operating expenses:
Research and development 8,739 7,314 19.5%
Selling, general and
administrative 114,109 89,215 27.9%
---------- ----------
Total operating expenses 122,848 96,529 27.3%
Operating income 46,303 44,226 4.7%
Other income and (expense):
Investment and other income 385 2,279 -83.1%
Interest expense (6,428) (4,496) 43.0%
---------- ----------
Income before income taxes 40,260 42,009 -4.2%
Income taxes 11,273 11,763 -4.2%
---------- ----------
Net income $ 28,987 $ 30,246 -4.2%
========== ==========
Per Class A Nonvoting Common Share:
Basic net income $ 0.54 $ 0.62 -12.9%
Diluted net income $ 0.53 $ 0.61 -13.1%
Dividends $ 0.14 $ 0.13 7.7%
Per Class B Voting Common Share:
Basic net income $ 0.54 $ 0.62 -12.9%
Diluted net income $ 0.53 $ 0.61 -13.1%
Dividends $ 0.14 $ 0.13 7.7%
Weighted average common shares
outstanding (in Thousands):
Basic 53,953 48,923
Diluted 54,717 49,833
Nine Months Ended April 30,
---------------------------------
Percentage
2007 2006 Change
---------- ---------- ----------
Net sales $ 999,866 $ 730,103 36.9%
Cost of products sold 516,426 348,252 48.3%
---------- ----------
Gross margin 483,440 381,851 26.6%
Operating expenses:
Research and development 26,353 20,677 27.5%
Selling, general and
administrative 326,119 241,543 35.0%
---------- ----------
Total operating expenses 352,472 262,220 34.4%
Operating income 130,968 119,631 9.5%
Other income and (expense):
Investment and other income 917 2,759 -66.8%
Interest expense (16,407) (8,920) 83.9%
---------- ----------
Income before income taxes 115,478 113,470 1.8%
Income taxes 32,334 31,772 1.8%
---------- ----------
Net income $ 83,144 $ 81,698 1.8%
========== ==========
Per Class A Nonvoting Common Share:
Basic net income $ 1.54 $ 1.67 -7.8%
Diluted net income $ 1.52 $ 1.64 -7.3%
Dividends $ 0.42 $ 0.39 7.7%
Per Class B Voting Common Share:
Basic net income $ 1.53 $ 1.65 -7.3%
Diluted net income $ 1.50 $ 1.62 -7.4%
Dividends $ 0.40 $ 0.37 8.1%
Weighted average common shares
outstanding (in Thousands):
Basic 53,860 49,039
Diluted 54,704 49,962
BRADY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(Unaudited)
---------------------
April 30, July 31,
2007 2006
---------- ----------
ASSETS
------------------------------------------------
Current assets:
Cash and cash equivalents $ 119,338 $ 113,008
Short term investments 1,200 11,500
Accounts receivable, less allowance for
losses ($8,828 and $6,390, respectively) 240,055 187,907
Inventories:
Finished products 82,295 59,365
Work-in-process 20,437 12,850
Raw materials and supplies 41,548 37,702
---------- ----------
Total inventories 144,280 109,917
Prepaid expenses and other current assets 41,738 36,825
---------- ----------
Total current assets 546,611 459,157
Other assets:
Goodwill 724,404 587,642
Other intangible assets, net 159,384 134,111
Deferred income taxes 37,185 34,135
Other 20,633 10,235
---------- ----------
Total other assets 941,606 766,123
Property, plant and equipment:
Cost:
Land 6,299 6,548
Buildings and improvements 85,825 78,418
Machinery and equipment 235,914 198,426
Construction in progress 24,811 12,098
---------- ----------
352,849 295,490
Less accumulated depreciation 180,640 155,584
---------- ----------
Net property, plant and equipment 172,209 139,906
---------- ----------
Total $1,660,426 $1,365,186
========== ==========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
------------------------------------------------
Current liabilities:
Accounts payable $ 94,415 $ 78,585
Wages and amounts withheld from employees 62,560 61,778
Taxes, other than income taxes 6,881 6,231
Accrued income taxes 30,897 25,243
Other current liabilities 51,531 46,763
Short-term borrowings and current maturities
on long-term debt 7 20
---------- ----------
Total current liabilities 246,291 218,620
Long-term obligations, less current maturities 500,017 350,018
Other liabilities 63,719 50,502
---------- ----------
Total liabilities 810,027 619,140
Stockholders' investment:
Common stock:
Class A nonvoting common stock - Issued
50,481,743 and 50,481,743 shares,
respectively and outstanding 50,423,441 and
50,188,842 shares, respectively 505 505
Class B voting common stock - Issued and
outstanding, 3,538,628 shares 35 35
Additional paid-in capital 260,342 258,922
Income retained in the business 521,567 460,991
Treasury stock - 58,302 and 292,901 shares,
respectively of Class A nonvoting common
stock, at cost (2,218) (10,865)
Accumulated other comprehensive income 69,420 35,696
Other 748 762
---------- ----------
Total stockholders' investment 850,399 746,046
---------- ----------
Total $1,660,426 $1,365,186
========== ==========
BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands) (Unaudited)
Nine Months Ended
April 30
2007 2006
--------- ---------
Operating activities:
Net income $ 83,144 $ 81,698
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 40,403 23,973
Gain on foreign currency contract - (1,517)
Deferred income taxes (2,129) (3,500)
Loss on disposal of property, plant & equipment (182) 188
Provision for losses on accounts receivable 1,800 1,102
Non-cash portion of stock-based compensation
expense 5,022 4,275
Changes in operating assets and liabilities
(net of effects of business acquisitions):
Accounts receivable (21,946) (25,570)
Inventories (17,544) (14,123)
Prepaid expenses and other assets (14,634) (2,604)
Accounts payable and accrued liabilities (2,454) (3,748)
Income taxes 4,008 (1,657)
Other liabilities 4,169 4,813
--------- ---------
Net cash provided by operating activities 79,657 63,330
Investing activities:
Acquisition of businesses, net of cash acquired (157,943) (155,283)
Payments of contingent consideration (10,906) -
Purchases of short-term investments (47,100) (105,800)
Sales of short-term investments 57,400 82,900
Purchases of property, plant and equipment (42,107) (26,291)
Purchase of foreign currency contract - (2,134)
Proceeds from sale of property, plant and
equipment 1,703 (51)
Other (8,978) (1,907)
--------- ---------
Net cash used in investing activities (207,931) (208,566)
Financing activities:
Payment of dividends (22,073) (19,070)
Proceeds from issuance of common stock 4,144 6,960
Principal payments on debt (110,674) (339,051)
Proceeds from issuance of debt 259,300 538,330
Purchase of treasury stock - (27,299)
Income tax benefit from the exercise of stock
options 902 3,707
--------- ---------
Net cash provided by financing activities 131,599 163,577
Effect of exchange rate changes on cash 3,005 (997)
Net increase (decrease) in cash and cash
equivalents 6,330 17,344
Cash and cash equivalents, beginning of period 113,008 72,970
--------- ---------
Cash and cash equivalents, end of period 119,338 90,314
========= =========
Supplemental disclosures:
Cash paid during the period for:
Interest, net of capitalized interest $ 16,003 $ 4,572
Income taxes, net of refunds 33,268 30,844
Acquisitions:
Fair value of assets acquired, net of cash $ 87,224 $ 61,602
Liabilities assumed (33,037) (23,188)
Goodwill 103,756 116,869
--------- ---------
Net cash paid for acquisitions $ 157,943 $ 155,283
========= =========
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES
(in thousands)
Fiscal 2006
-------------------------------------------------
Q1 Q2 Q3 Q4 Total
--------- --------- --------- --------- ---------
EBITDA (1)
Net income $ 30,198 $ 21,254 $ 30,246 $ 81,698
Interest expense 1,989 2,435 4,496 8,920
Income taxes 12,334 7,675 11,763 31,772
Depreciation and
amortization 7,360 7,194 9,419 23,973
-------------------------------------------------
EBITDA (non-GAAP
measure) $ 51,881 $ 38,558 $ 55,924 $ - $146,363
Fiscal 2007
-------------------------------------------------
Q1 Q2 Q3 Q4 Total
-------------------------------------------------
EBITDA (1)
Net income $ 34,448 $ 19,709 $ 28,987 $ 83,144
Interest expense 4,735 5,244 6,428 16,407
Income taxes 13,396 7,665 11,273 32,334
Depreciation and
amortization 12,927 13,169 14,307 40,403
-------------------------------------------------
EBITDA (non-GAAP
measure) $ 65,506 $ 45,787 $ 60,995 $ - $172,288
(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.
CONTACT: Brady Corporation
For More Information:
Investor contact: Barbara Bolens 414-438-6940
Media contact: Carole Herbstreit 414-438-6882