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Brady Corporation Reports Fiscal 2013 Second Quarter Results And Announces Reorganization

Stocks in this article: BRC

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
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 
(Dollars in Thousands, Except Per Share Amounts)
 
(Unaudited)   (Unaudited)
Three Months Ended January 31, Six Months Ended January 31,
2013 2012 2013 2012
Net sales $ 324,182 $ 320,584 $ 661,828 $ 670,092
Cost of products sold   174,130     167,279     347,156     348,956  
Gross margin 150,052 153,305 314,672 321,136
Operating expenses:
Research and development 8,551 9,972 17,036 19,781
Selling, general and administrative 117,240 104,843 225,501 213,775
Restructuring charges 4,031 4,031
Impairment charge 115,688 115,688
Non-routine items   (5,220 )       (1,782 )    
Total operating expenses 124,602 230,503 244,786 349,244
 
Operating income (loss) 25,450 (77,198 ) 69,886 (28,108 )
 
Other income and (expense):
Investment and other income (expense) 897 812 1,294 610
Interest expense   (4,406 )   (4,933 )   (8,569 )   (9,980 )
 
Income before income taxes 21,941 (81,319 ) 62,611 (37,478 )
 
Income taxes   30,625     8,635     44,107     19,744  
 
Net (loss) income $ (8,684 ) $ (89,954 ) $ 18,504   $ (57,222 )
 
 
Per Class A Nonvoting Common Share:
Basic net income $ (0.17 ) $ (1.72 ) $ 0.36 $ (1.09 )
Diluted net income $ (0.17 ) $ (1.72 ) $ 0.36 $ (1.09 )
Dividends $ 0.19 $ 0.185 $ 0.38 $ 0.37
 
Per Class B Voting Common Share:
Basic net income $ (0.17 ) $ (1.72 ) $ 0.34 $ (1.11 )
Diluted net income $ (0.17 ) $ (1.72 ) $ 0.34 $ (1.11 )
Dividends $ 0.19 $ 0.185 $ 0.36 $ 0.35
 
Weighted average common shares outstanding (in thousands):
Basic 51,177 52,447 51,108 52,552
Diluted 51,177 52,447 51,507 52,552
   
BRADY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
 
(Unaudited)
January 31, 2013 July 31, 2012

ASSETS

Current assets:
Cash and cash equivalents $ 141,311 $ 305,900
Accounts receivable—net 229,219 199,006
Inventories:
Finished products 75,040 64,740
Work-in-process 17,549 15,377
Raw materials and supplies   32,242     25,407  
Total inventories 124,831 105,524
Prepaid expenses and other current assets   47,656     40,424  
Total current assets 543,017 650,854
Other assets:
Goodwill 877,972 676,791
Other intangible assets 185,495 84,119
Deferred income taxes 6,032 45,356
Other 22,711 20,584
Property, plant and equipment:
Cost:
Land 9,145 8,651
Buildings and improvements 105,501 101,962
Machinery and equipment 313,512 292,130
Construction in progress   12,444     10,417  
440,602 413,160
Less accumulated depreciation   289,860     283,145  
Property, plant and equipment—net   150,742     130,015  
Total $ 1,785,969   $ 1,607,719  

LIABILITIES AND STOCKHOLDERS’ INVESTMENT

Current liabilities:
Notes payable $ 112,340 $
Accounts payable 103,197 86,646
Wages and amounts withheld from employees 40,564 54,629
Taxes, other than income taxes 8,313 9,307
Accrued income taxes 8,869 14,357
Other current liabilities 46,930 40,815
Current maturities on long-term debt   61,264     61,264  
Total current liabilities 381,477 267,018
Long-term obligations, less current maturities 264,417 254,944
Other liabilities   102,225     76,404  
Total liabilities 748,119 598,366
Stockholders’ investment:
Common stock:
Class A nonvoting common stock—Issued 51,261,487 and 51,261,487 shares, respectively and outstanding 47,711,496 and 47,630,926 shares, respectively 513 513
Class B voting common stock—Issued and outstanding, 3,538,628 shares 35 35
Additional paid-in capital 315,425 313,008
Earnings retained in the business 731,294 732,290
Treasury stock—3,234,991 and 3,245,561 shares, respectively of Class A nonvoting common stock, at cost (88,354 ) (92,600 )
Accumulated other comprehensive income 81,475 59,411
Other (2,538 ) (3,304 )
Total stockholders’ investment   1,037,850     1,009,353  
Total $ 1,785,969   $ 1,607,719  
   
BRADY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(Dollars in Thousands)
 
(Unaudited)
Six Months Ended January 31,
2013 2012
Operating activities:
Net income (loss) $ 18,504 $ (57,222 )
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 22,046 22,176
Non-cash portion of restructuring charges 200
Non-cash portion of stock-based compensation expense 6,868 5,506
Impairment charge 115,688
Loss (gain) on sales of businesses 3,138
Deferred income taxes 26,050 (4,831 )
Changes in operating assets and liabilities (net of effects of business acquisitions/divestitures):
Accounts receivable (5,418 ) 6,029
Inventories (4,475 ) (11,814 )
Prepaid expenses and other assets (2,772 ) (5,155 )
Accounts payable and accrued liabilities (13,629 ) (36,297 )
Income taxes   (6,318 )   9,221  
Net cash provided by operating activities 44,194 43,301
Investing activities:
Purchases of property, plant and equipment (15,667 ) (11,100 )
Payments of contingent consideration (2,580 )
Settlement of net investment hedges (797 )
Acquisition of business, net of cash acquired (300,757 )
Sales of businesses, net of cash retained 10,178
Other   (549 )   (128 )
Net cash used in investing activities (306,795 ) (14,605 )
Financing activities:
Payment of dividends (19,499 ) (19,452 )
Proceeds from issuance of common stock 4,409 2,301
Purchase of treasury stock (5,121 ) (12,309 )
Proceeds from borrowings on credit revolver 220,000
Repayment of borrowings on credit revolver (112,472 )
Income tax benefit from the exercise of stock options and deferred compensation distribution, and other   1,273     566  
Net cash provided by (used in) financing activities 88,590 (28,894 )
Effect of exchange rate changes on cash 9,422 (9,442 )
Net decrease in cash and cash equivalents (164,589 ) (9,640 )
Cash and cash equivalents, beginning of period   305,900     389,971  
Cash and cash equivalents, end of period $ 141,311   $ 380,331  
Supplemental disclosures:
Cash paid during the period for:
Interest, net of capitalized interest $ 7,866 $ 9,521
Income taxes, net of refunds 19,964 16,189
Acquisitions:
Fair value of assets acquired, net of cash $ 168,675 $
Liabilities assumed (57,860 )
Goodwill   189,942      
Net cash paid for acquisitions $ 300,757   $  
           
Information by regional segment for the three and six months ended January 31, 2013 and 2012 is as follows:
 
Corporate
and
(Dollars in Thousands)   Americas   EMEA   Asia-Pacific   Total Region   Eliminations   Total
SALES TO EXTERNAL CUSTOMERS                        
Three months ended:
January 31, 2013 $ 147,716 $ 94,395 $ 82,071 $ 324,182 $ 324,182
January 31, 2012 $ 138,405 $ 95,593 $ 86,586 $ 320,584 $ 320,584
 
Six months ended:
January 31, 2013 $ 296,408 $ 187,628 $ 177,792 $ 661,828 $ 661,828
January 31, 2012 $ 292,267 $ 192,949 $ 184,876 $ 670,092 $ 670,092
 
SALES INFORMATION                        
Three months ended January 31, 2013:
Organic 0.6 % (5.0 )% (7.0 )% (3.1 )% % (3.1 )%
Currency (0.4 )% (0.3 )% 1.8 % 0.2 % % 0.2 %
Acquisitions/Divestitures 6.5 % 4.0 % 0.0 % 4.0 % % 4.0 %
Total 6.7 % (1.3 )% (5.2 )% 1.1 % % 1.1 %
 
Six months ended January 31, 2013:                      
Organic (0.1 )% (4.1 )% (4.6 )% (2.5 )% % (2.5 )%
Currency (0.8 )% (3.0 )% 0.8 % (1.0 )% % (1.0 )%
Acquisitions/Divestitures 2.3 % 4.3 % 0.0 % 2.2 % % 2.2 %
Total 1.4 % (2.8 )% (3.8 )% (1.3 )% % (1.3 )%
 
SEGMENT PROFIT                        
Three months ended:
January 31, 2013 $ 32,336 $ 23,723 $ 5,514 $ 61,573 $ (1,794 ) $ 59,779
January 31, 2012 $ 35,798 $ 26,562 $ 7,733 $ 70,093 $ (2,359 ) $ 67,734
Percentage change (9.7 )% (10.7 )% (28.7 )% (12.2 )% (11.7 )%
 
Six months ended:
January 31, 2013 $ 76,969 $ 47,290 $ 17,569 $ 141,828 $ (3,767 ) $ 138,061
January 31, 2012 $ 79,028 $ 52,861 $ 21,037 $ 152,926 $ (5,622 ) $ 147,304
Percentage change (2.6 )% (10.5 )% (16.5 )% (7.3 )% (6.3 )%
     
NET INCOME RECONCILIATION (in thousands)
  Three Months Ended January 31, Six Months Ended January 31,
2013 2012 2013 2012
Total profit for reportable segments $ 61,573 $ 70,093 $ 141,828 $ 152,926
Corporate and eliminations (1,794 ) (2,359 ) (3,767 ) (5,622 )
Unallocated amounts:
Administrative costs (35,518 ) (29,244 ) (65,926 ) (59,724 )
Restructuring charges (4,031 ) - (4,031 ) -
Impairment charge - (115,688 ) - (115,688 )
Non-routine items 5,220 - 1,782 -
Investment and other income 897 812 1,294 610
Interest expense   (4,406 )   (4,933 )   (8,569 )   (9,980 )
Income (loss) before income taxes 21,941 (81,319 ) 62,611 (37,478 )
Income taxes   30,625     8,635     44,107     19,744  
Net (loss) income $ (8,684 ) $ (89,954 ) $ 18,504   $ (57,222 )
           
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.
 
 
EBITDA:
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, 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.
 
 
 
 
Fiscal 2013
Q1     Q2   Q3   Q4   Total
EBITDA:
Net income (loss) $ 27,188 $ (8,684 ) $ 18,504
Interest expense 4,163 4,406 8,569
Income taxes 13,482 30,625 44,107
Depreciation and amortization   10,675       11,371               22,046  
 
EBITDA (non-GAAP measure) $ 55,508     $ 37,718                 $ 93,226  
 
 
Fiscal 2012
Q1     Q2   Q3   Q4   Total
EBITDA:
Net income (loss) $ 32,732 $ (89,954 ) $ 27,652 $ 11,659 $ (17,911 )
Interest expense 5,047 4,933 4,735 4,375 19,090
Income taxes 11,109 8,635 9,676 11,241 40,661
Depreciation and amortization 11,241 10,935 10,745 11,066 43,987
Impairment charge         115,688                   115,688  
 
EBITDA (non-GAAP measure) $ 60,129     $ 50,237     $ 52,808     $ 38,341     $ 201,515  
 
GAAP TO NON-GAAP MEASURES
(Dollars in Thousands, Except Per Share Amounts)
 
Income Before Taxes Excluding Restructuring Charges, Non-Routine Items, and Other:
Brady is presenting the Non-GAAP measure "Income Before Taxes Excluding Restructuring Charges, Non-Routine Items, and Other." This is not a calculation based upon GAAP. The amounts included in this Non-GAAP measure are derived from amounts included in the Condensed Consolidated Statements of Income data. 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 Income (Loss) Before Taxes to Income Before Taxes Excluding Restructuring Charges, Non-Routine Items, and Other:
 
 
 
 
Three Months Ended January 31, Six Months Ended January 31,
2013 2012 2013 2012
Income (loss) before taxes (GAAP measure) $ 21,941 $ (81,319 ) $ 62,611 $ (37,478 )
Non-routine items - pre-tax
Gain on Thailand insurance recovery (5,220 ) (5,220 )
Loss on the sale of Brady Medical 3,675
Gain on the sale of Varitronics           (237 )    
Non-routine items - pre-tax (5,220 ) (1,782 )
 
Other items - pre-tax
Cost of goods sold
Purchase accounting expense related to inventory 1,530 1,530
Selling, general and administrative
PDC acquisition-related expenses 3,600 3,600
Restructuring charges 4,031 4,031
Impairment charge 115,688 115,688
Income taxes
Non-cash tax charge                
Other items - pre-tax 9,161 115,688 9,161 115,688
 

Income Before Taxes Excluding Restructuring Charges, Non-Routine Items, and Other (Non-GAAP measure)

$ 25,882   $ 34,369   $ 69,990   $ 78,210  
 
Income Taxes Excluding Restructuring Charges, Non-Routine Items, and Other:
Brady is presenting the Non-GAAP measure "Income Taxes Excluding Restructuring Charges, Non-Routine Items, and Other." This is not a calculation based upon GAAP. The amounts included in this Non-GAAP measure are derived from amounts included in the Condensed Consolidated Statements of Income data. 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 to Income Taxes Excluding Restructuring Charges, Non-Routine Items, and Other:
 
 
 
Three Months Ended January 31, Six Months Ended January 31,
2013 2012 2013 2012
Income taxes (GAAP measure) $ 30,625 $ 8,635 $ 44,107 $ 19,744
Non-routine items - tax effect
Gain on Thailand insurance recovery (1,201 ) (1,201 )
Loss on the sale of Brady Medical 1,098
Gain on the sale of Varitronics           (875 )    
Non-routine items - tax effect (1,201 ) (978 )
 
Other items - tax effect
Cost of goods sold
Purchase accounting expense related to inventory 581 581
Selling, general and administrative
PDC acquisition-related expenses 641 641
Restructuring charges 750 750
Impairment charge
Income taxes
Non-cash tax charge   (25,000 )       (25,000 )    
Other items - tax effect (23,028 ) (23,028 )
 

Income Taxes Excluding Restructuring Charges, Non-Routine Items, and Other (Non-GAAP measure)

$ 6,396   $ 8,635   $ 20,101   $ 19,744  
 
 
GAAP TO NON-GAAP MEASURES
(Dollars in Thousands, Except Per Share Amounts)
 
Net Income Excluding Restructuring Charges, Non-Routine Items, and Other:
Brady is presenting the Non-GAAP measure "Net Income Excluding Restructuring Charges, Non-Routine Items, and Other." This is not a calculation based upon GAAP. The amounts included in this Non-GAAP measure are derived from amounts included in the Condensed Consolidated Statements of Income data. 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 (Loss) Income to Net Income Excluding Restructuring Charges, Non-Routine Items, and Other:
 
 
 
Three Months Ended January 31, Six Months Ended January 31,
2013 2012 2013 2012
Net (loss) income (GAAP measure) $ (8,684 ) $ (89,954 ) $ 18,504 $ (57,222 )
Non-routine items - net of tax
Gain on Thailand insurance recovery (4,019 ) (4,019 )
Loss on the sale of Brady Medical 2,577
Gain on the sale of Varitronics           638      
Non-routine items - net of tax (4,019 ) (804 )
 
Other items - net of tax
Cost of goods sold
Purchase accounting expense related to inventory 949 949
Selling, general and administrative
PDC acquisition-related expenses 2,959 2,959
Restructuring charges 3,281 3,281
Impairment charge 115,688 115,688
Income taxes
Non-cash tax charge   25,000         25,000      
Other items - net of tax 32,189 115,688 32,189 115,688
 

Net Income Excluding Restructuring Charges, Non-Routine Items, and Other (Non-GAAP measure)

$ 19,486   $ 25,734   $ 49,889   $ 58,466  
 
Diluted Net Income Per Class A Nonvoting Common Share Excluding Restructuring Charges, Non-Routine Items, and Other:
Brady is presenting the Non-GAAP measure "Diluted Net Income Per Class A Nonvoting Common Share Excluding Restructuring Charges, Non-Routine Items, and Other." This is not a calculation based upon GAAP. The amounts included in this Non-GAAP measure are derived from amounts included in the Condensed Consolidated Statements of Income data. 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 Diluted Net (Loss) Income Per Class A Nonvoting Common Share to Diluted Net Income Per Class A Nonvoting Common Share Excluding Restructuring Charges, Non-Routine Items, and Other:
 
 
 
Three Months Ended January 31, Six Months Ended January 31,
2013 2012 2013 2012

Diluted Net (Loss) Income Per Class A Nonvoting Share (GAAP measure)

$ (0.17 ) $ (1.72 ) $ 0.36 $ (1.09 )
Non-routine items
Gain on Thailand insurance recovery (0.08 ) (0.08 )
Loss on the sale of Brady Medical 0.05
Gain on the sale of Varitronics           0.01      
Non-routine items (0.08 ) (0.02 )
 
Other items
Cost of goods sold
Purchase accounting expense related to inventory 0.02 0.02
Selling, general and administrative
PDC acquisition-related expenses 0.06 0.06
Restructuring charges 0.06 0.06
Impairment charge 2.21 2.21
Income taxes
Non-cash tax charge   0.49         0.49      
Other items 0.63 2.21 0.62 2.21
 

Diluted Net Income Per Class A Nonvoting Share Excluding Restructuring Charges, Non-Routine Items, and Other (Non-GAAP measure)

$ 0.38   $ 0.49   $ 0.97   $ 1.12  




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