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Brady Corp. Loss Narrows, Trims Outlook; To Reorganize Business; Stock Down

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2/21/2013 1:34 PM ET

Brady Corp. (BRC: Quote), a provider of identification solutions, Thursday reported a net loss for the second quarter that narrowed from last year, when results were impacted by goodwill-related charges in the Asia-Pacific region. Revenues edged up from the prior year on growth in the Americas, but were offset by lower gross margin. Excluding items, Brady reported a quarterly profit that missed Wall Street estimates, while revenues exceeded expectations.

Moving forward, Brady said it expects adjusted earnings per Class A common share to be towards the lower end of its prior guidance of $2.20 to $2.40 for fiscal year 2013. Analysts polled by Thomson Reuters currently estimate earnings of $2.28 per share. Analysts' estimates typically exclude special items.

"We anticipate continuing pressure on organic sales for the remainder of fiscal 2013 as the global macro-economy remains sluggish," the company said.

Shares of the company are losing more than 6 percent in morning trade on the New York Stock Exchange.

Brady also said that as part of its strategy to improve organic growth, it will be changing its organizational structure from geographically-based to an organization structured around three global business platforms: Identification Solutions, Workplace Safety and Die-Cut.

The company said the business reorganization will reduce costs by about $25 million to $30 million annually. Costs to implement this reorganization are expected to range from $15 million to $18 million. The reorganization will be effective May 1, with most of the restructuring completed by the end of fiscal 2013.

Milwaukee, Wisconsin-based Brady reported quarterly net loss of $8.7 million or $0.17 per share, compared with net loss of $90 million or $1.72 per share last year.

Results for the prior year included impairment charges of $115.7 million.

Excluding items, adjusted earnings for the reporting quarter were $19.5 million or $0.38 per share, compared with $25.7 million or $0.49 per share in the prior year.

On average, seven analysts polled by Thomson Reuters estimated earnings of $0.48 per share for the quarter. Analysts' estimates typically exclude special items.

Brady, which also provides specialty materials, said its sales for the quarter edged up to $324.2 million from $320.6 million a year ago. Analysts on consensus estimated sales of $323.75 million.

On an organic basis, sales fell 3.1 percent. The impact of foreign currency translation increased sales by 0.2 percent, and acquisitions, net of divestitures added 4 percent.

Among regions, sales growth was strong in the Americas, while declines were seen in the EMEA and Asia Pacific regions.

During the quarter, the company acquired Precision Dynamics Corp. for $301 million, and in connection with the deal, incurred acquisition-related costs including a non-cash tax charge of $25 million.

Detailing its business reorganization, Brady said that its Identification Solutions business will focus on innovative identification solutions for a range of applications including product, and safety and facility identification. The business will be led by Matthew Williamson, who is currently serving as vice president of the company and president - Brady Americas.

The Workplace Safety business will be expanding its multi-channel direct marketing model by providing a broader set of workplace safety products with an increased focus on e-business. The business will be led by Scott Hoffman, who is currently serving as vice president - Corporate and Business Development.

The Die-Cut business will continue to provide precision solutions primarily to the global electronics industry. Stephen Millar will lead the business. Millar currently serves as vice president of the company and president - Asia-Pacific.

Peter Sephton, currently president of Brady's EMEA region, will be retiring from Brady effective July 31, 2013. Sephton will remain in his current role as vice president of Brady and President - Brady EMEA through April 30, when he will resign these positions.

Shares of Brady are trading at $33.03, down $2.43 or 6.85%.

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by RTT Staff Writer

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