Brady Corporation Reports Fiscal 2013 Fourth Quarter Results And Certain Non-Cash Charges

Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for the fiscal 2013 fourth quarter ended July 31, 2013.

Effective May 1, 2013, the Company changed its reporting structure from geographically-based to an organization structured around three global business platforms: Identification Solutions, Workplace Safety and Die-Cut. The Identification Solutions business focuses on identification solutions for a broad range of applications including wire identification, product identification, safety and facility identification, people identification and healthcare identification. The Workplace Safety business focuses on workplace safety and compliance products, and is expanding its multi-channel direct-marketing model with an increased focus on e-business. The Die-Cut business continues to provide precision solutions primarily to the global electronics industry. In May 2013, the Company announced plans to sell its Die-Cut business. Accordingly, the Company has recast its prior-period financial statements to report the financial results of the Die-Cut business on a line item as discontinued operations in the accompanying consolidated statements of income.

Quarter Ended July 31, 2013 Financial Results:

Sales from continuing operations for the fiscal 2013 fourth quarter ended July 31, 2013 were up 14.9 percent to $309.1 million compared to $269.1 million in the fourth quarter of fiscal 2012. Organic sales were down 2.3 percent, the acquisition of Precision Dynamics Corporation (“PDC”) added 16.9 percent to sales, and the impact of foreign currency translation increased sales by 0.3 percent. By segment, organic sales were up 2.1 percent in Identification Solutions and down 8.6 percent in Workplace Safety.

During the quarter ended July 31, 2013, the Company recorded non-cash impairment charges of $204.4 million related to the write-down of certain long-lived assets in Asia, the write-down of goodwill of the Company’s North American Workplace Safety business, and the write down of certain other intangible assets. During the quarter, the Company also recorded restructuring charges of $15.6 million and non-cash tax charges of $4.0 million related to the funding of the PDC acquisition and the recording of certain tax valuation allowances.

Net earnings (loss) from continuing operations for the fiscal 2013 fourth quarter ended July 31, 2013, were a loss of $(176.2) million compared to earnings of $20.9 million in the same quarter last year. Non-GAAP net earnings from continuing operations* for the fiscal fourth quarter ended July 31, 2013, was $27.9 million compared to $29.3 million in the same quarter last year.

Earnings (loss) from continuing operations per diluted Class A Nonvoting Common Share was $(3.41) for the fourth quarter of fiscal 2013 compared to $0.40 in the same quarter last year. Non-GAAP earnings from continuing operations per diluted Class A Nonvoting Common Share* were $0.53 in the fourth quarter of fiscal 2013 and $0.56 per share in the same quarter of fiscal 2012.

Year Ended July 31, 2013 Financial Results:

Sales from continuing operations for the year ended July 31, 2013, were up 7.8 percent to $1.15 billion compared to $1.07 billion for the year ended July 31, 2012. Organic sales were down 2.6 percent; acquisitions increased sales by 11.3 percent; and the impact of foreign currency translation decreased sales by 0.9 percent. By segment, Identification Solutions’ organic sales increased 0.3 percent and Workplace Safety’s organic sales decreased 7.0 percent.

Earnings (loss) from continuing operations for the year ended July 31, 2013, was a loss of $(140.8) million compared to earnings of $102.5 million for the year ended July 31, 2012. Non-GAAP net earnings from continuing operations* was $99.9 million for the year ended July 31, 2013 compared to $112.2 million for the year ended July 31, 2012.

Earnings (loss) from continuing operations per diluted Class A Nonvoting Common Share were $(2.75) for the year ended July 31, 2013 compared to $1.94 for the year ended July 31, 2012. Non-GAAP earnings from continuing operations per diluted Class A Nonvoting Common Share* was $1.93 for the year-ended July 31, 2013, compared to $2.12 for the year-ended July 31, 2012.

Commentary and Guidance:

“Fiscal 2013 was a year of unprecedented change and transformation for Brady. In addition to reorganizing our businesses around global business platforms, we also engaged in a business simplification process that resulted in a structure that brings us closer to our customers and more effectively supports our growth,” said Brady’s President and Chief Executive Officer, Frank M. Jaehnert. “In fiscal 2013, we also made significant changes in our portfolio of companies. We sold several smaller non-core businesses and announced that we are seeking a buyer for our Die-Cut business. At the same time, we completed the acquisition of PDC, which was the largest acquisition in Brady’s nearly 100-year history. PDC is a leader in healthcare identification and gives Brady a strong entrance into the healthcare identification space.

“We are committed to returning to organic sales growth in fiscal 2014. Our Identification Solutions business will continue to focus on industries such as healthcare, food and beverage, chemical, oil and gas, and aerospace and mass transit, as well as expanding into faster-growing geographies such as Central Europe, the Middle East, Africa and selected markets in Asia. We are accelerating investment in our Workplace Safety business to improve organic sales and profit by building a scalable multi-channel model that all of our global Workplace Safety businesses will use. This accelerated investment will be evident in our fiscal 2014 financial results and is included in our guidance for next year.”

Brady’s Chief Financial Officer, Thomas J. Felmer said, “Brady remains financially very strong. Cash provided by operating activities was $143.5 million during the year ended July 31, 2013, which is in line with the prior year and our debt balance is lower today than it was prior to the purchase of PDC.

“As we look ahead to fiscal 2014, we anticipate organic sales to range from a slight contraction to low single-digit growth, with organic sales strongest in our Identification Solutions business. We expect organic sales to be down in the first half of the year and return to positive organic sales in the second half of fiscal 2014 as our initiatives to improve our Workplace Safety business begin to produce results. For fiscal 2014, we expect earnings from continuing operations per diluted Class A Nonvoting Common Share of between $1.80 and $2.00, exclusive of restructuring charges. Included in this guidance are approximately $0.08 of benefits from the acquisition of PDC, $0.40 of benefits from business simplification activities, an incremental $(0.20) of investments into our Workplace Safety business, and $(0.25) of incremental expenses due to more normalized incentive compensation. This guidance is based on current exchange rates, a full-year income tax rate in the mid-to-upper 20 percent range, capital expenditures of approximately $40 million, and depreciation and amortization of approximately $50 million. We also anticipate approximately $30 million of restructuring charges in fiscal 2014, which will result in approximately $10 million of annualized operational savings beginning in fiscal 2015.”

A webcast regarding Brady’s fiscal 2013 fourth 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.

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 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, 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 develop and successfully market new products; changes in the supply of, or price for, parts and components; increased price pressure from suppliers and customers; fluctuations in currency rates versus the US dollar; unforeseen tax consequences; potential write-offs of Brady’s substantial intangible assets; Brady’s ability to retain significant contracts and customers; risks associated with international operations; Brady’s ability to maintain compliance with its debt covenants; technology changes; business interruptions due to implementing business systems; environmental, health and safety compliance costs and liabilities; future competition; interruptions to sources of supply; Brady’s ability to realize cost savings from operating initiatives; difficulties associated with exports; risks associated with restructuring plans; risks associated with obtaining governmental approvals and maintaining regulatory compliance; 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 I of Brady’s Form 10-K for the year ended July 31, 2012. 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
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share data)
       
Three months ended July 31, Twelve Months Ended July 31,
2013 2012 2013 2012
Net sales $ 309,097 $ 269,089 $ 1,152,109 $ 1,068,688
Cost of products sold   152,086     121,636     546,029     479,118  
Gross margin 157,011 147,453 606,080 589,570
Operating expenses:
Research and development 9,390 8,996 33,552 34,528
Selling, general and administrative 106,938 100,283 427,661 392,526
Restructuring charges 15,573 4,107 26,046 6,084
Impairment charges   204,448         204,448      
Total operating expenses 336,349 113,386 691,707 433,138
 
Operating (loss) income (179,338 ) 34,067 (85,627 ) 156,432
 
Other income and (expense):
Investment and other income 1,095 362 3,522 2,082
Interest expense   (3,886 )   (4,375 )   (16,641 )   (19,090 )
 
(Loss) earnings from continuing operations before income taxes (182,129 ) 30,054 (98,746 ) 139,424
 
Income tax (benefit) expense   (5,895 )   9,185     42,070     36,953  
 
(Loss) earnings from continuing operations $ (176,234 ) $ 20,869 $ (140,816 ) $ 102,471
 
(Loss) from discontinued operations, net of income taxes   (1,037 )   (9,210 )   (13,719 )   (120,382 )
 
Net (loss) earnings $ (177,271 ) $ 11,659   $ (154,535 ) $ (17,911 )
 
(Loss) earnings from continuing operations per Class A Nonvoting Common Share:
Basic $ (3.41 ) $ 0.40 $ (2.75 ) $ 1.95
Diluted $ (3.41 ) $ 0.40 $ (2.75 ) $ 1.94
 
(Loss) earnings from continuing operations per Class B Voting Common Share:
Basic $ (3.41 ) $ 0.40 $ (2.76 ) $ 1.93
Diluted $ (3.41 ) $ 0.40 $ (2.76 ) $ 1.92
 
(Loss) from discontinued operations per Class A Nonvoting Common Share:
Basic $ (0.02 ) $ (0.18 ) $ (0.27 ) $ (2.30 )
Diluted $ (0.02 ) $ (0.18 ) $ (0.27 ) $ (2.29 )
 
(Loss) from discontinued operations per Class B Voting Common Share:
Basic $ (0.02 ) $ (0.18 ) $ (0.27 ) $ (2.29 )
Diluted $ (0.02 ) $ (0.18 ) $ (0.27 ) $ (2.28 )
 
(Loss) earnings per Class A Nonvoting Common Share:
Basic $ (3.43 ) $ 0.22 $ (3.02 ) $ (0.35 )
Diluted $ (3.43 ) $ 0.22 $ (3.02 ) $ (0.35 )
Dividends $ 0.19 $ 0.185 $ 0.76 $ 0.74
 
(Loss) earnings per Class B Voting Common Share:
Basic $ (3.43 ) $ 0.22 $ (3.03 ) $ (0.36 )
Diluted $ (3.43 ) $ 0.22 $ (3.03 ) $ (0.36 )
Dividends $ 0.19 $ 0.185 $ 0.74 $ 0.72
 
Weighted average common shares outstanding (in thousands):
Basic 51,689 52,196 51,330 52,453
Diluted 51,689 52,448 51,330 52,821
 
BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
   
July 31, 2013 July 31, 2012

ASSETS
Current assets:
Cash and cash equivalents $ 91,058 $ 305,900
Accounts receivable—net 169,261 199,006
Inventories:
Finished products 64,544 64,740
Work-in-process 14,776 15,377
Raw materials and supplies   15,387     25,407  
Total inventories 94,707 105,524
Assets held for sale 119,864
Prepaid expenses and other current assets   37,600     40,424  
Total current assets 512,490 650,854
Other assets:
Goodwill 617,236 676,791
Other intangible assets 156,851 84,119
Deferred income taxes 8,623 45,356
Other 21,325 20,584
Property, plant and equipment:
Cost:
Land 7,861 8,651
Buildings and improvements 91,471 101,962
Machinery and equipment 266,787 292,130
Construction in progress   11,842     10,417  
377,961 413,160
Less accumulated depreciation   255,803     283,145  
Property, plant and equipment—net   122,158     130,015  
Total $ 1,438,683   $ 1,607,719  

LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
Notes payable $ 50,613
Accounts payable 82,519 86,646
Wages and amounts withheld from employees 42,413 54,629
Liabilities held for sale 34,583
Taxes, other than income taxes 8,243 9,307
Accrued income taxes 7,056 14,357
Other current liabilities 36,806 40,815
Current maturities on long-term debt   61,264     61,264  
Total current liabilities 323,497 267,018
Long-term obligations, less current maturities 201,150 254,944
Other liabilities   83,239     76,404  
Total liabilities 607,886 598,366
Stockholders’ investment:
Common stock:
Class A nonvoting common stock—Issued 51,261,487 and 51,261,487 shares, respectively and outstanding 48,408,544 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 306,191 313,008
Earnings retained in the business 538,512 732,290
Treasury stock—2,626,276 and 3,245,561 shares, respectively of Class A nonvoting

common stock, at cost
(69,797 ) (92,600 )
Accumulated other comprehensive income 56,063 59,411
Other   (720 )   (3,304 )
Total stockholders’ investment   830,797     1,009,353  
Total $ 1,438,683   $ 1,607,719  
 
BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
   
July 31, 2013 July 31, 2012
Operating activities:
Net loss $ (154,535 ) $ (17,911 )
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 48,725 43,987
Non-cash portion of restructuring charges 3,699 458
Non-cash portion of stock-based compensation expense 1,736 9,735
Impairment charge 204,448 115,688
Loss on write-down of assets held for sale 15,658
Loss (gain) on sales of businesses 3,138 204
Deferred income taxes 21,630 (9,679 )
Changes in operating assets and liabilities (net of effects of business acquisitions/divestitures):
Accounts receivable 1,535 18,089
Inventories 2,440 (7,674 )
Prepaid expenses and other assets 5,036 (2,744 )
Accounts payable and accrued liabilities (2,285 ) (29,370 )
Income taxes   (7,722 )   23,922  
Net cash provided by operating activities 143,503 144,705
 
Investing activities:
Purchases of property, plant and equipment (35,687 ) (24,147 )
Payments of contingent consideration (2,580 )
Settlement of net investment hedges (797 )
Acquisition of business, net of cash acquired (301,157 ) (37,649 )
Sales of businesses, net of cash retained 10,178 856
Other   900     (287 )

Net cash used in investing activities
(325,766 ) (64,604 )
 
Financing activities:
Payment of dividends (39,243 ) (38,899 )
Proceeds from issuance of common stock 20,324 3,864
Purchase of treasury stock (5,121 ) (49,933 )
Proceeds from borrowings on notes payable 220,000
Repayment of borrowings on notes payable (181,000 )
Proceeds from borrowings on line of credit 11,613
Principal payments on debt (61,264 ) (62,687 )
Debt issuance costs (961 )
Income tax benefit from the exercise of stock options and deferred compensation distribution, and other   1,631     792  
Net cash used in financing activities (33,060 ) (147,824 )
 
Effect of exchange rate changes on cash 481 (16,348 )
 
Net decrease in cash and cash equivalents (214,842 ) (84,071 )
Cash and cash equivalents, beginning of period   305,900     389,971  
 
Cash and cash equivalents, end of period $ 91,058   $ 305,900  
 
Supplemental disclosures:
Cash paid during the period for:
Interest, net of capitalized interest $ 16,708 $ 19,194
Income taxes, net of refunds 34,030 35,292
Acquisitions:
Fair value of assets acquired, net of cash $ 168,724 $ 23,792
Liabilities assumed (37,747 ) (8,987 )
Goodwill   170,180     22,844  
Net cash paid for acquisitions $ 301,157   $ 37,649  
         
EBITDA from Continuing Operations
Brady is presenting EBITDA from Continuing Operations because it is used by many of our investors and lenders, and is presented as a convenience to them. EBITDA from Continuing Operations represents earnings from continuing operations before interest expense, income taxes, depreciation, amortization and impairment charges. EBITDA from Continuing Operations is not a calculation based on generally accepted accounting principles ("GAAP"). The amounts included in the EBITDA from Continuing Operations calculation, however, are derived from amounts included in the Consolidated Statements of Earnings data. EBITDA from Continuing Operations should not be considered as an alternative to net earnings or operating income as an indicator of the Company's operating performance, or as an alternative to net cash provided by operating activities as a measure of liquidity. The EBITDA from Continuing Operations 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 from Continuing Operations:
Earnings (loss) from continuing operations $ 25,785 $ (11,365 ) $ 20,998 $ (176,234 ) $ (140,816 )
Interest expense 4,163 4,406 4,186 3,886 16,641
Income taxes 13,077 28,823 6,065 (5,895 ) 42,070
Depreciation and amortization 7,684 8,490 11,065 12,688 39,927
Intangible asset write-down in restructuring charges 3,207 3,207
Impairment charges             204,448     204,448  
EBITDA from Continuing Operations (non-GAAP measure)
$ 50,709 $ 30,354   $ 45,521   $ 38,893   $ 165,477  
 
                 
Fiscal 2012
 
Q1 Q2 Q3 Q4 Total
EBITDA from Continuing Operations:
Earnings from continuing operations $ 27,856 $ 26,436 $ 27,310 $ 20,869 $ 102,471
Interest expense 5,047 4,933 4,735 4,375 19,090
Income taxes 9,640 6,838 11,290 9,185 36,953
Depreciation and amortization   7,825   7,548       8,051       7,657       31,081  
EBITDA from Continuing Operations (non-GAAP measure)
$ 50,368 $ 45,755   $ 51,386   $ 42,086   $ 189,595  
 
 
EBITDA from Discontinued Operations

Brady is presenting EBITDA from Discontinued Operations because it is used by many of our investors and lenders, and is presented as a convenience to them. EBITDA from Discontinued Operations represents earnings (loss) from discontinued operations before interest expense, income taxes, depreciation, amortization, and impairment charges. EBITDA from Discontinued Operations is not a calculation based on generally accepted accounting principles ("GAAP"). The amounts included in the EBITDA from Discontinued Operations calculation, however, are derived from amounts included in the Consolidated Statements of Earnings data. EBITDA from Discontinued Operations should not be considered as an alternative to net earnings or operating income as an indicator of the Company's operating performance, or as an alternative to net cash provided by operating activities as a measure of liquidity. The EBITDA from Discontinued Operations 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 from Discontinued Operations:
Earnings (loss) from discontinued operations $ 1,403 $ 2,680 $ (16,765 ) $ (1,037 ) $ (13,719 )
Interest expense
Income taxes 404 1,802 1,530 1,478 5,214
Depreciation and amortization 2,991 2,881 2,926 8,798
Loss on write-down of assets held for sale 15,658 15,658
Impairment charges                  

EBITDA from Discontinued Operations (non-GAAP measure)
$ 4,798 $ 7,363   $ 3,349   $ 441   $ 15,951  
 
                 
Fiscal 2012
 
Q1 Q2 Q3 Q4 Total
EBITDA from Discontinued Operations:
Earnings (loss) from discontinued operations $ 4,876 $ (116,390 ) $ 342 $ (9,210 ) $ (120,382 )
Interest expense
Income taxes 1,469 1,798 (1,615 ) 2,056 3,708
Depreciation and amortization 3,417 3,387 2,693 3,409 12,906
Impairment charges     115,688             115,688  

EBITDA from Discontinued Operations (non-GAAP measure)
$ 9,762 $ 4,483   $ 1,420   $ (3,745 ) $ 11,920  
 
 
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 earnings before interest expense, income taxes, depreciation, amortization and impairment charges. 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 Consolidated Statements of Earnings data. EBITDA should not be considered as an alternative to net earnings or operating income as an indicator of the Company's operating performance, or as an alternative to net cash provided by operating activities 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 earnings (loss) $ 27,188 $ (8,685 ) $ 4,233 $ (177,271 ) $ (154,535 )
Interest expense 4,163 4,406 4,186 3,886 16,641
Income taxes 13,481 30,625 7,595 (4,417 ) 47,284
Depreciation and amortization 10,675 11,371 13,991 12,688 48,725
Intangible asset write-down in restructuring charges 3,207 3,207
Loss on write-down of assets held for sale 15,658 15,658
Impairment charges             204,448     204,448  
 
EBITDA (non-GAAP measure) $ 55,507 $ 37,717   $ 48,870   $ 39,334   $ 181,428  
 
                 
Fiscal 2012
 
Q1 Q2 Q3 Q4 Total
EBITDA:
Net earnings (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 8,636 9,675 11,241 40,661
Depreciation and amortization 11,242 10,935 10,744 11,066 43,987
Impairment charge     115,688             115,688  
 
EBITDA (non-GAAP measure) $ 60,130 $ 50,238   $ 52,806   $ 38,341   $ 201,515  
 
 
(Loss) Earnings from Continuing Operations Before Income Taxes Excluding Certain Items:
Brady is presenting the Non-GAAP measure "(Loss) 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 Statements of Earnings 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 (Loss) Earnings from Continuing Operations Before Income Taxes to (Loss) Earnings from Continuing Operations Before Income Taxes Excluding Certain Items":
 
Three Months Ended July 31, Year Ended July 31,
2013 2012 2013 2012
(Loss) Earnings from Continuing Operations Before Income Taxes
(GAAP measure) $ (182,129 ) $ 30,054 $ (98,746 ) $ 139,424
Cost of goods sold:

Purchase accounting expense related to inventory
1,530
Selling, general and administrative:
PDC acquisition-related expenses 3,600
Reversal of restricted stock grant expense (4,232 ) (4,232 )
Restructuring charges 15,573 4,107 26,046 6,084
Impairment charges 204,448 204,448
Non-cash income tax charges related to PDC funding
and certain valuation allowances                
 
(Loss) Earnings from Continuing Operations Before Income Taxes Excluding Certain
Excluding Certain Items (non-GAAP measure) $ 33,660   $ 34,161   $ 132,646   $ 145,508  
 
 
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 Statements of Earnings 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 on Continuing Operations to Income Taxes on Continuing Operations Excluding Certain Items:
 
 
Three Months Ended July 31, Year Ended July 31,
2013 2012 2013 2012
Income Taxes on Continuing Operations (GAAP measure) $ (5,895 ) $ 9,185 $ 42,070 $ 36,953
Cost of goods sold:
Purchase accounting expense related to inventory 581
Selling, general and administrative:
PDC acquisition-related expenses 641
Reversal of restricted stock grant expense (1,608 ) (1,608 )
Restructuring charges 4,337 1,314 7,157 2,014
Impairment charges 12,892 12,892
Non-cash income tax charges related to PDC funding
and certain valuation allowances   (3,976 )   (5,616 )   (28,976 )   (5,616 )
 
Income Taxes on Continuing Operations Excluding Certain Items

(non-GAAP measure)
$ 5,750   $ 4,883   $ 32,757   $ 33,351  
 
 
Net (Loss) Earnings from Continuing Operations Excluding Certain Items:
Brady is presenting the Non-GAAP measure "Net (Loss) 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 Statements of Earnings 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) Earnings from Continuing Operations to Net (Loss) Earnings from Continuing Operations Excluding Certain Items:
 
Three Months Ended July 31, Year Ended July 31,
2013 2012 2013 2012
Net (Loss) Earnings from Continuing Operations (GAAP measure) $ (176,234 ) $ 20,869 $ (140,816 ) $ 102,471
Cost of goods sold:
Purchase accounting expense related to inventory 949
Selling, general and administrative:
PDC acquisition-related expenses 2,959
Reversal of restricted stock grant expense (2,624 ) (2,624 )
Restructuring charges 11,236 2,793 18,889 4,070
Impairment charges 191,556 191,556
Non-cash income tax charges related to PDC funding
and certain valuation allowances   3,976     5,616     28,976     5,616  
 
Net Earnings from Continuing Operations Excluding Certain Items
(non-GAAP measure) $ 27,910   $ 29,278   $ 99,889   $ 112,157  
 
 
Net Earnings from Continuing Operations Per Diluted Class A Diluted 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 Statements of Earnings 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) 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 July 31, Year Ended July 31,
2013 2012 2013 2012
Net (Loss) Earnings from Continuing Operations Per Class A Diluted
Nonvoting Share (GAAP measure) $ (3.41 ) $ 0.40 $ (2.75 ) $ 1.94
Cost of goods sold:
Purchase accounting expense related to inventory 0.02
Selling, general and administrative:
PDC acquisition-related expenses 0.06
Reversal of restricted stock grant expense (0.05 ) (0.05 )
Restructuring charges 0.22 0.05 0.37 0.08
Impairment charges 3.71 3.71
Non-cash income tax charges related to PDC funding
and certain valuation allowances   0.08     0.11     0.56     0.11  
 
Net Earnings from Continuing Operations Per Class A Diluted Nonvoting
Share Excluding Certain Items (non-GAAP measure) $ 0.53   $ 0.56   $ 1.93   $ 2.12  
               
BRADY CORPORATION AND SUBSIDIARIES
SEGMENT INFORMATION
   
                                         
Fiscal 2012   Fiscal 2013
(Dollars in Thousands)   Q1   Q2   Q3   Q4   YTD   Q1   Q2   Q3   Q4   YTD

SALES TO EXTERNAL CUSTOMERS
   
Identification Solutions   $ 163,968     $ 149,012     $ 160,481     $ 160,312     $ 633,774     $ 161,244     $ 166,707     $ 195,905     $ 209,576     $ 733,433  
Workplace Safety   $ 109,428     $ 106,040     $ 110,669     $ 108,777     $ 434,914     $ 109,622     $ 104,468     $ 105,066     $ 99,521     $ 418,676  
Total Company   $ 273,396     $ 255,052     $ 271,150     $ 269,089     $ 1,068,688     $ 270,866     $ 271,175     $ 300,971     $ 309,097     $ 1,152,109  
                                         
                                         

SALES INFORMATION
Identification Solutions                                        
Organic     5.5 %     (0.8 )%     2.1 %     3.8 %     2.7 %     0.4 %     1.3 %     (2.3 )%     2.1 %     0.3 %
Currency     1.7 %     (0.8 )%     (1.8 )%     (5.0 )%     (1.6 )%     (2.5 )%     (0.5 )%     (1.0 )%     0.2 %     (0.9 )%
Acquisitions     %     %     0.3 %     0.4 %     0.2 %     0.4 %     11.1 %     25.4 %     28.4 %     16.3 %
Total     7.2 %     (1.6 )%     0.6 %     (0.8 )%     1.3 %     (1.7 )%     11.9 %     22.1 %     30.7 %     15.7 %
                                         
Workplace Safety                                        
Organic     4.4 %     (1.1 )%     (1.6 )%     (1.8 )%     (0.2 )%     (3.3 )%     (7.0 )%     (9.0 )%     (8.6 )%     (7.0 )%
Currency     3.7 %     (0.3 )%     (1.6 )%     (6.1 )%     (1.2 )%     (2.3 )%     0.4 %     (1.1 )%     0.1 %     (0.7 )%
Acquisitions     1.9 %     %     %     4.5 %     1.6 %     5.8 %     5.1 %     5.0 %     %     4.0 %
Total     10.0 %     (1.4 )%     (3.2 )%     (3.4 )%     0.2 %     0.2 %     (1.5 )%     (5.1 )%     (8.5 )%     (3.7 )%
                                         
Total Company                                        
Organic     5.1 %     (0.9 )%     0.6 %     1.5 %     1.5 %     (1.1 )%     (2.2 )%     (5.0 )%     (2.3 )%     (2.6 )%
Currency     2.4 %     (0.6 )%     (1.8 )%     (5.5 )%     (1.4 )%     (2.4 )%     (0.1 )%     (1.1 )%     0.3 %     (0.9 )%
Acquisitions     0.8 %     %     0.2 %     2.1 %     0.8 %     2.6 %     8.6 %     17.1 %     16.9 %     11.3 %
Total     8.3 %     (1.5 )%     (1.0 )%     (1.9 )%     0.9 %     (0.9 )%     6.3 %     11.0 %     14.9 %     7.8 %
                                         
                                         

SEGMENT PROFIT
Identification Solutions   $ 41,839     $ 36,844     $ 40,711     $ 40,034     $ 159,427     $ 43,973     $ 33,813     $ 45,967     $ 47,565     $ 171,319  
Workplace Safety   $ 30,321     $ 28,545     $ 29,141     $ 29,179     $ 117,187     $ 27,829     $ 23,600     $ 23,453     $ 20,360     $ 95,241  
Total Company   $ 72,160     $ 65,389     $ 69,852     $ 69,213     $ 276,614     $ 71,802     $ 57,413     $ 69,420     $ 67,925     $ 266,560  
                                         
                                         

SEGMENT PROFIT AS PERCENT OF SALES
Identification Solutions     25.5 %     24.7 %     25.4 %     25.0 %     25.2 %     27.3 %     20.3 %     23.5 %     22.7 %     23.4 %
Workplace Safety     27.7 %     26.9 %     26.3 %     26.8 %     26.9 %     25.4 %     22.6 %     22.3 %     20.5 %     22.7 %
Total Company     26.4 %     25.6 %     25.8 %     25.7 %     25.9 %     26.5 %     21.2 %     23.1 %     22.0 %     23.1 %
                                         

Net Earnings Reconciliation
Total segment profit   $ 72,160     $ 65,389     $ 69,852     $ 69,213     $ 276,614     $ 71,802     $ 57,413     $ 69,420     $ 67,925     $ 266,560  
Unallocated Amounts:                                        
Administrative costs     29,415       27,996       25,648       31,039       114,098       29,173       34,513       30,765       27,242       121,693  
Restructuring charges                 1,977       4,107       6,084             1,933       8,540       15,573       26,046  
Impairment charges                                                     204,448       204,448  
Investment and other expense (income)     203       (813 )     (1,109 )     (362 )     (2,082 )     (396 )     (898 )     (1,132 )     (1,095 )     (3,522 )
Interest expense     5,047       4,933       4,735       4,375       19,090       4,163       4,406       4,186       3,886       16,641  
Earnings (loss) from continuing operations before income taxes   $ 37,495     $ 33,273     $ 38,601     $ 30,054     $ 139,424     $ 38,862     $ 17,459     $ 27,061     $ (182,129 )   $ (98,746 )

Copyright Business Wire 2010

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