Friday, Brady Corp. (BRC), a manufacturer of identification solutions and specialty products, reported a 44.8% fall in profit for the fourth quarter, hurt by restructuring charges as well as sharp decline in net sales amid global economic downturn. Further, the Milwaukee, Wisconsin-based company issued fiscal 2010 earnings forecast.
Fourth-quarter net income dropped to $19.20 million from $34.78 million in the prior year period, and earnings per Class A share fell 42.2% to $0.37 from last year's $0.64. The latest quarter results include after tax restructuring charges of $3.4 million or $0.06 per share.
On average, six analysts polled by Thomson Reuters expected the company to report earnings of $0.42 per share for the quarter. Analysts estimates typically exclude special items.
Net sales for the quarter declined 27.6% to $287.20 million from $396.85 million in the comparable period. Three Wall Street analysts had a consensus revenue estimate of $291.33 million for the quarter.
Organic sales in the quarter fell 23%, acquisition growth was flat, and foreign currency translation reduced sales by 5%. On a geographical basis, organic sales were down 25% in Europe, 24% in the Americas, and 15% in Asia/Pacific.
Fourth-quarter gross margin dropped 29.1% to $136.12 million from $191.93 million a year ago, and operating income fell 44.2% to $30.29 million from prior year's $54.32 million.
For the fiscal year 2009, Brady's net income declined 47% to $70.12 million from $132.19 million in fiscal 2008. Earnings per Class A share fell 44.8% to $1.33 from last year's $2.41, and earnings per Class B share dropped 45.2% to $1.31 from $2.39 a year ago. The latest yearly results included after-tax restructuring charges of $20.2 million or $0.38 per share.
Annual net sales were $1.209 billion, down 20.6% from $1.523 billion in sales in fiscal 2008. Organic sales were down 16%, acquisitions added 1% to sales results, and foreign currency translation reduced sales by 5%.
Analysts projected earnings of $1.68 per share on sales of $1.21 billion for the year.
Commenting on the results, Brady President and Chief Executive Officer Frank Jaehnert stated, "After a strong first quarter, the global economic downturn caused a 27% drop in our sales over the balance of the year. Despite this, we earned $90 million in net income excluding restructuring charges and generated $127 million in cash flow from operations. Beginning in the second quarter, we took quick and aggressive actions to adjust our cost structure, including a significant workforce reduction. We believe that these strategic investments along with our reduced cost structure position us well for the current economic climate as well as for future economic recovery."
Looking ahead for fiscal 2010, Brady said it expects net income to be between $85 million and $95 million and earnings per share to be between $1.60 and $1.80. Analysts estimate earnings of $1.78 per share for the year, with estimates ranging between $1.57 and $1.95 per share, .
The guidance excludes additional expected pretax restructuring charges of approximately $15 million or $0.20 per share, which would result in annualized pretax savings of approximately $15 million, of which $10 million are expected to be realized in fiscal 2010, the company said.
The company added that its earnings forecast for the year assumes that sales will continue at or near current levels through the first half of its fiscal year, followed by modest growth in the second half of the year.
Felmer said, "We expect that the challenges of the global recession will continue into the first half of fiscal 2010."
Brady also said it expects up to $40 million of fiscal 2009 pretax savings to be non-recurring and will impact fiscal 2010 starting in the first quarter. Capital expenditures in fiscal 2010 is projected to be approximately $25 million, with depreciation and amortization consistent with fiscal 2009 levels.
BRC closed Thursday's regular trading session at $33.06, up $2.28, on a volume of 470 thousand shares.
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