Brady Corporation Reports Fiscal 2014 Fourth Quarter Results

MILWAUKEE--(BUSINESS WIRE)--Brady Corporation (NYSE: BRC), a world leader in identification solutions, has reported its financial results for the fiscal 2014 fourth quarter ended July 31, 2014.

Quarter Ended July 31, 2014 Financial Results:

Sales from continuing operations for the quarter ended July 31, 2014 increased 2.0 percent to $316.7 million compared to the fourth quarter of fiscal 2013. Total organic sales increased 1.1 percent. By segment, organic sales were up 1.2 percent in Identification Solutions and 0.9 percent in Workplace Safety.

During the fourth quarter ended July 31, 2014, the Company recorded an impairment charge of $148.6 million primarily related to the write down of intangible assets in the Company’s PeopleID reporting unit. This reporting unit includes the December 2012 acquisition of Precision Dynamics Corporation (“PDC”), which primarily sells identification products into the healthcare industry. PDC’s organic sales declined low single digits for the fiscal year ended July 31, 2014 and are forecasted to grow at a slower pace than originally anticipated. This lack of historical sales growth and reduced forecasts for future sales growth are the main drivers for this impairment charge. In the fourth quarter of last year, the Company also incurred an impairment charge of $204.4 million related to the Company’s North American Workplace Safety reporting unit and its Asia reporting unit.

Net (loss) from continuing operations for the quarter ended July 31, 2014 was $(97.0) million compared to $(175.6) million in the same quarter last year. Non-GAAP net earnings from continuing operations* for the quarter ended July 31, 2014, were $21.0 million compared to $28.6 million in the same quarter last year.

Net (loss) from continuing operations per Class A Nonvoting Common Share was $(1.89) for the fourth quarter ended July 31, 2014 compared to $(3.40) in the same quarter last year. Non-GAAP earnings from continuing operations per diluted Class A Nonvoting Common Share* were $0.41 in the fourth quarter of fiscal 2014 and $0.55 per share in the fourth quarter of fiscal 2013.

Year Ended July 31, 2014 Financial Results:

Sales from continuing operations for the year ended July 31, 2014 were up 5.8 percent to $1.23 billion compared to $1.16 billion in fiscal 2013. Organic sales were up 0.2 percent. By segment, organic sales were up 2.9 percent in Identification Solutions and down 4.6 percent in Workplace Safety.

Net (loss) from continuing operations for the year ended July 31, 2014 was $(48.1) million compared to $(138.3) million for the year ended July 31, 2013. Non-GAAP net earnings from continuing operations* for the year ended July 31, 2014 were $79.5 million compared to $102.4 million for the year ended July 31, 2013.

Net (loss) from continuing operations per Class A Nonvoting Common Share was $(0.93) for the year ended July 31, 2014 compared to $(2.70) for the year ended July 31, 2013. Non-GAAP earnings from continuing operations per diluted Class A Nonvoting Common Share* were $1.53 for the year ended July 31, 2014 and $1.98 per share for the year ended July 31, 2013.

Commentary:

“We were encouraged by our revenue growth in the fourth quarter, which marks the second consecutive quarter of organic sales growth. This marks the first quarter of growth in our Workplace Safety business since fiscal 2012 as we continue to add new customers, increase revenues over the internet and realize returns from increased catalog advertising,” said Brady President and CEO J. Michael Nauman.

“Although we had organic sales growth, we were not pleased with our profitability performance as we continued to incur costs related to the consolidation of our facilities and have been experiencing challenges in terms of sales mix and pricing. Our overall facility consolidation efforts have been scaled back, and we will continue to execute the facility consolidation activities in a manner that will allow us to maintain the highest service levels and least disruptions to our customers while still achieving efficiency gains over the long run. We are focused on executing business fundamentals to drive organic sales growth while deemphasizing acquisitions at this time. We are increasing our investments in R&D to create sustainable processes for developing new innovative products that generate significant value for our customers. We will also focus on penetrating specific vertical markets in our Identification Solutions business in order to drive sales growth within our current industries including healthcare; food and beverage; chemical, oil and gas; and aerospace and mass transit, as well as expand our presence and product offering in selected markets in Asia. This accelerated investment in Identification Solutions will be evident in our fiscal 2015 financial results and is included in our guidance for next year,” said Nauman.

“Although our fourth quarter profitability and cash flow did not meet our expectations, we continue to have a strong balance sheet which strengthened during the quarter as we repaid an additional $32.7 million of debt,” said Brady’s Chief Financial Officer Aaron J. Pearce.

Fiscal 2015 Guidance:

The Company anticipates low single-digit organic sales growth in fiscal 2015, with organic sales growth in both the Identification Solutions and Workplace Safety businesses. Brady also expects earnings from continuing operations per diluted Class A Nonvoting Common Share of between $1.50 and $1.70, exclusive of restructuring charges and other non-routine charges. This guidance is based on current exchange rates, a full-year income tax rate in the mid-to-upper 20 percent range. We also anticipate approximately $15 million of restructuring charges in fiscal 2015 and capital expenditures of approximately $30 million in fiscal 2015 before returning to a more normalized level in fiscal 2016.

Executive Appointments:

Brady’s Board of Directors has appointed Thomas J. Felmer to serve as the Company’s Senior Vice President and President – Workplace Safety. Mr. Felmer most recently served as Senior Vice President and CFO. He joined Brady in 1989 and has held various Group President and general management positions across several Brady businesses in both the U.S. and Europe.

With Mr. Felmer’s appointment as President – Workplace Safety, the Board has appointed Aaron J. Pearce to serve as Senior Vice President and Chief Financial Officer of the Company. Mr. Pearce joined Brady in 2004 as Director of Internal Audit, and has held various financial leadership positions including Finance Director for the Company’s Asia Pacific Region; Global Tax Director; Vice President, Treasurer and Director of Investor Relations; and Vice President - Finance, with responsibility for finance support to the Company’s Workplace Safety and ID Solutions businesses, as well as financial planning and analysis.

“Tom Felmer is a talented executive who has been with Brady for more than 25 years and I am pleased that he has accepted the role of President of Workplace Safety and that he will continue his excellent work leading the turnaround of this business unit,” said Brady President and CEO J. Michael Nauman. “Aaron Pearce brings a broad range of financial experience and intimate knowledge of Brady’s business to the role of CFO and I look forward to working with him in this capacity.”

Brady Corporation is an international manufacturer and marketer of complete solutions that identify and protect people, products and places. Brady’s products help customers increase safety, security, productivity and performance and include high-performance labels, signs, safety devices, printing systems and software. 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 August 1, 2014, employed approximately 6,400 people in its worldwide businesses. Brady’s fiscal 2014 sales were approximately $1.23 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.