EX-99 2 c15432exv99.htm PRESS RELEASE exv99
 

EXHIBIT 99
For More Information:
Investor contact: Barbara Bolens 414-438-6940
Media contact: Carole Herbstreit 414-438-6882
For Immediate Release
Brady reports F’07 third-quarter sales and earnings
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        
(in Thousands)   Americas     Europe     Asia     Subtotals     Eliminations     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 month 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,     Nine Months Ended April 30,  
                    Percentage                     Percentage  
    2007     2006     Change     2007     2006     Change  
 
                                                
Net sales
   $ 346,332     $ 266,494       30.0 %   $ 999,866     $ 730,103       36.9 %
Cost of products sold
     177,181       125,739       40.9 %     516,426       348,252       48.3 %
 
                                        
Gross margin
     169,151       140,755       20.2 %     483,440       381,851       26.6 %
 
                                                
Operating expenses:
                                                
Research and development
     8,739       7,314       19.5 %     26,353       20,677       27.5 %
Selling, general and administrative
     114,109       89,215       27.9 %     326,119       241,543       35.0 %
 
                                        
Total operating expenses
     122,848       96,529       27.3 %     352,472       262,220       34.4 %
 
                                                
Operating income
     46,303       44,226       4.7 %     130,968       119,631       9.5 %
 
                                                
Other income and (expense):
                                                
Investment and other income
     385       2,279       -83.1 %     917       2,759       -66.8 %
Interest expense
     (6,428 )     (4,496 )     43.0 %     (16,407 )     (8,920 )     83.9 %
 
                                        
Income before income taxes
     40,260       42,009       -4.2 %     115,478       113,470       1.8 %
 
                                                
Income taxes
     11,273       11,763       -4.2 %     32,334       31,772       1.8 %
 
                                        
 
                                                
Net income
   $ 28,987     $ 30,246       -4.2 %   $ 83,144     $ 81,698       1.8 %
 
                                        
 
                                                
Per Class A Nonvoting Common Share:
                                                
Basic net income
   $ 0.54     $ 0.62       -12.9 %   $ 1.54     $ 1.67       -7.8 %
Diluted net income
   $ 0.53     $ 0.61       -13.1 %   $ 1.52     $ 1.64       -7.3 %
Dividends
   $ 0.14     $ 0.13       7.7 %   $ 0.42     $ 0.39       7.7 %
 
                                                
Per Class B Voting Common Share:
                                                
Basic net income
   $ 0.54     $ 0.62       -12.9 %   $ 1.53     $ 1.65       -7.3 %
Diluted net income
   $ 0.53     $ 0.61       -13.1 %   $ 1.50     $ 1.62       -7.4 %
Dividends
   $ 0.14     $ 0.13       7.7 %   $ 0.40     $ 0.37       8.1 %
 
                                                
Weighted average common shares outstanding
(in Thousands):
                                                
Basic
     53,953       48,923               53,860       49,039          
Diluted
     54,717       49,833               54,704       49,962          

 

BRADY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)
                 
    (Unaudited)  
    April 30, 2007     July 31, 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,
     505       505  
respectively and outstanding 50,423,441 and 50,188,842 shares, respectively
                
 
                
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.