For More Information:
Investor contact: Barbara Bolens 414-438-6940
Media contact: Carole Herbstreit 414-438-6882
FOR IMMEDIATE RELEASE
BRADY REPORTS INCREASE IN SALES FOR ITS FISCAL 2003 SECOND QUARTER
MILWAUKEE (February 14, 2003)--Brady Corporation (NYSE: BRC), a world leader in
identification solutions, today announced results for its fiscal 2003 second
quarter ended January 31, 2003.
Sales for the quarter were $129.6 million, compared to $120.6 million
in the second quarter last year, an increase of 7.5 percent. Net income for the
quarter was $2.8 million or $0.12 per diluted Class A Common Share, down from
$6.1 million or $0.26 per share reported in the fiscal 2002 second quarter. Both
sales and net income results are in line with previously announced company
guidance.
Sales for the six months ended January 31, 2003, rose 7.0 percent to
$268.2 compared to $250.6 million in the same period last year. Net income for
the period was $11.0 million or $0.46 per share compared to $14.1 million, or
$0.60 per share in the period last year.
"Our sales in the quarter reflect a stable base business, a positive
impact from foreign exchange, and contributions from our ongoing acquisition
program. While we are encouraged by the growth in sales for the third straight
quarter, our net income in this quarter was strongly impacted by declining
margins from a less favorable product mix, and temporary disruptions due to a
business systems conversion in our North American direct marketing business,"
said Katherine M. Hudson, president and chief executive officer of Brady
Corporation. "We began to see improvement in both these areas in January and,
while not enough to fully compensate for earlier declines in the quarter, we
believe that a stronger second half will allow us to finish the year with net
income of $1.27 to $1.37 and sales of $552 to $562 million, in keeping with our
earlier guidance.
"Selling, General and Administrative (SG&A) expenses rose in the
quarter, due to costs from acquisitions, implementation of the third wave of our
new enterprise resource planning (ERP) system, and expansion of our catalog
program in Europe. In addition, foreign currency translation increased our
expenses in Europe and Asia.
"Going forward, we are not anticipating much improvement in the global
economy, nonetheless, we remain confident that our strategic investments are
positioning us for future growth. These include acquisitions, global expansion
initiatives and process improvement.
"In the second quarter we acquired Tiscor, Inc., a software developer
specializing in safety and security applications for hand-held computing
devices. We also continued our expansion in Asia, with new manufacturing
facilities in Malaysia and China. And we are continuing to implement our process
improvement initiatives, which are now in place in more than 70 percent of our
businesses, in order to better leverage our resources across multiple markets,
channels and customers.
"Despite investment in these strategies, our cash position remains
strong, with $20.7 million in operating cash flow and a cash balance of $65.6
million as of January 31, 2003."
A Webcast of a conference call regarding the company's fiscal 2003
second quarter results will be available at www.investor.bradycorp.com beginning
at 9:30 a.m. Central Standard Time today.
Brady is an international manufacturer and marketer of identification
and materials solutions, with products including labels, signs, precision
die-cut materials, printing systems, software, and label-application and
data-collection systems for electronics, telecommunications, manufacturing,
electrical, and a variety of other markets. Founded in 1914, Brady is
headquartered in Milwaukee and employs more than 3,000 people in operations in
the United States, Europe, Asia/Pacific, Latin America and Canada. More
information is available on the Internet at www.bradycorp.com.
###
This news release contains forward-looking information, as defined in the
Private Securities Litigation Reform Act of 1995. Forward-looking information in
this release involves risks and uncertainties, including, but not limited to,
domestic and international economic conditions and growth rates; fluctuations in
currency exchange rates for international currencies versus the U.S. dollar; the
successful implementation of a new enterprise-resource-planning system; the
ability of the company to acquire, integrate and achieve anticipated synergies
from new businesses; the ability of the company to adjust its cost structure to
changes in levels of sales and product mix in a timely manner; variations in the
economic or political conditions in the countries in which the company does
business; technology changes; and the continued availability of sources of
supply. Brady cautions that forward-looking statements are not guarantees, since
there are inherent difficulties in predicting future results, and that actual
results could differ materially from those expressed or implied in
forward-looking statements.
BRADY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND EARNINGS RETAINED
IN THE BUSINESS
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited) (Unaudited)
Three Months Ended Six Months Ended
January 31, January 31,
2003 2002 2003 2002
--------- --------- --------- ---------
NET SALES $ 129,565 $ 120,589 $ 268,227 $ 250,590
Operating expenses:
Cost of products sold 65,909 60,952 134,354 124,075
Research and development 4,572 4,168 8,643 8,620
Selling, general and administrative 54,535 46,083 108,307 96,841
--------- --------- --------- ---------
Total operating expenses 125,016 111,203 251,304 229,536
Operating income 4,549 9,386 16,923 21,054
Other income and (expense):
Investment and other income - net (275) 6 (189) 588
Interest expense (8) (3) (43) (19)
--------- --------- --------- ---------
Income before income taxes 4,266 9,389 16,691 21,623
Income taxes 1,449 3,251 5,675 7,490
--------- --------- --------- ---------
Net Income 2,817 6,138 11,016 14,133
Earnings retained in business at
beginning of period 291,231 280,519 287,674 276,779
Less dividends:
Preferred stock -- (65) (171) (130)
Common stock (4,540) (4,263) (9,011) (8,453)
Earnings retained in business at
end of period $ 289,508 $ 282,329 $ 289,508 $ 282,329
========= ========= ========= =========
Net income per Class A Nonvoting
Common Share
Basic $ 0.12 $ 0.26 $ 0.47 $ 0.61
========= ========= ========= =========
Diluted $ 0.12 $ 0.26 $ 0.46 $ 0.60
========= ========= ========= =========
Net income per Class B Voting
Common Share
Basic $ 0.12 $ 0.26 $ 0.44 $ 0.58
========= ========= ========= =========
Diluted $ 0.12 $ 0.26 $ 0.43 $ 0.57
========= ========= ========= =========
BRADY CORPORATION AND SUBSIDIARIES
COMPARATIVE BALANCE SHEETS
(DOLLARS IN THOUSANDS)
JANUARY 31, JULY 31,
ASSETS 2003 2002
----------- --------
(UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents $ 65,626 $ 75,969
Accounts receivable, less allowance for
losses ($3,780 and $3,206, respectively) 80,103 76,246
Inventories 37,747 36,718
Prepaid expenses and other current assets 17,455 21,093
-------- --------
TOTAL CURRENT ASSETS 200,931 210,026
OTHER ASSETS:
Goodwill - net 123,360 108,053
Other 22,050 21,555
-------- --------
145,410 129,608
PROPERTY, PLANT AND EQUIPMENT:
Cost:
Land 5,122 5,612
Buildings and improvements 48,945 50,122
Machinery and equipment 130,220 127,955
Construction in progress 8,453 3,062
-------- --------
192,740 186,751
Less accumulated depreciation 112,974 105,860
-------- --------
NET PROPERTY, PLANT AND EQUIPMENT 79,766 80,891
-------- --------
TOTAL $426,107 $420,525
======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable $ 23,953 $ 26,294
Wages and amounts withheld from employees 25,282 26,251
Taxes, other than income taxes 1,880 2,396
Accrued income taxes 8,256 6,312
Other current liabilities 16,803 12,847
Short-term borrowings and current maturities
on long-term debt 51 162
-------- --------
TOTAL CURRENT LIABILITIES 76,225 74,262
LONG-TERM DEBT, LESS CURRENT MATURITIES 865 3,751
OTHER LIABILITIES 18,262 18,270
-------- --------
TOTAL LIABILITIES 95,352 96,283
STOCKHOLDERS' INVESTMENT:
Preferred stock 2,855
Class A nonvoting common stock - Issued and
outstanding, 21,405,934 and 21,356,605
shares, respectively 214 214
Class B voting common stock - Issued and
outstanding 1,769,314 shares 18 18
Treasury Stock - 18,262 and 4,548 shares, at cost (509) (132)
Additional paid-in capital 43,146 41,526
Earnings retained in the business 289,508 287,674
Cumulative other comprehensive income (1,498) (7,665)
Other (124) (248)
-------- --------
TOTAL STOCKHOLDERS' INVESTMENT 330,755 324,242
-------- --------
TOTAL $426,107 $420,525
======== ========
BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands) (Unaudited)
Six Months Ended
January 31
2003 2002
-------- --------
Operating activities:
Net income $ 11,016 $ 14,133
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and Amortization 8,102 7,716
Loss on sale or disposal of property, plant & equipment 41 474
Provision for losses on accounts receivable 671 744
Amortization of restricted stock 123 347
Changes in operating assets and liabilities (net of
effects of business acquisitions):
Accounts receivable 1,320 1,046
Inventory 730 3,320
Prepaid expenses and other assets 787 (313)
Accounts payable, accrued expenses and other
liabilities (4,145) (2,800)
Income taxes 2,008 1,354
-------- --------
Net cash provided by operating activities 20,653 26,021
Investing activities:
Purchase of Business (12,817) (3,848)
Termination of Capital Lease (791) -
Purchases of property, plant and equipment (7,621) (6,474)
Proceeds from sale of property, plant and equipment 16 14
Other Investments (295) 14
-------- --------
Net cash used in investing activities (21,508) (10,294)
Financing activities:
Payment of dividends (9,182) (8,583)
Proceeds from issuance of Common Stock 1,620 2,519
Principal payments on debt (162) (1,539)
Redemption of preferred stock (2,855) -
Purchase of Treasury Stock (377) -
Proceeds from short-term borrowings - net 75 -
-------- --------
Net cash used in financing activities (10,881) (7,603)
Effect of exchange rate changes on cash 1,393 (929)
-------- --------
Net (decrease) increase in cash and cash equivalents (10,343) 7,195
Cash and cash equivalents, beginning of period 75,969 62,811
-------- --------
Cash and cash equivalents, end of period $ 65,626 $ 70,006
======== ========
Supplemental disclosures:
Cash paid during the period for:
Interest $ 38 $ 147
Income taxes, net of refunds 8,171 7,052
Acquisitions:
Fair value of asset acquired, net of cash $ 5,277 $ 1,095
Liabilities Assumed (2,009) (721)
Goodwill 9,549 3,474
-------- --------
Net cash paid for acquisitions $ 12,817 $ 3,848
======== ========
Termination of capital lease:
Disposition of capital assets $ (2,574) $ -
Settlement of capital lease liability 3,365 -
-------- --------
Net cash paid for termination of capital lease $ 791 $ -
======== ========