brady investor presentation -...
TRANSCRIPT
November 2007
Brady Investor Presentation
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elieve that certain statements in this presentation are “forward-looking statements” within the meaning of the Private Securities tion Reform Act of 1995. All statements related to future, not past, events included in this presentation, including, without limitatioments regarding our future financial position, business strategy, targets, projected sales, costs, earnings, capital expenditures, des and cash flows, and plans and objectives of management for future operations are forward-looking statements. When used in thntation, words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,” “project” or “plan” or similar nology are generally intended to identify forward-looking statements. These forward-looking statements by their nature address rs that are, to different degrees, uncertain and are subject to risks, assumptions and other factors, some of which are beyond our
ol, that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For usrtainties arise from future financial performance of major markets we serve, which include, without limitation, telecommunications,facturing, electrical, construction, laboratory, education, governmental, public utility, computer, transportation; difficulties in makin
ntegrating acquisitions; risks associated with newly acquired businesses; our ability to retain significant contracts and customers; e competition; our ability to develop and successfully market new products; changes in the supply of, or price for, parts and onents; increased price pressure from suppliers and customers; interruptions to sources of supply; environmental, health and safliance costs and liabilities; our ability to realize cost savings from operating initiatives; our ability to attract and retain key talent;
ulties associated with exports; risks associated with international operations; fluctuations in currency rates versus the US dollar; ology changes; potential write-offs of our substantial intangible assets; risks associated with obtaining governmental approvals anaining regulatory compliance for new and existing products; business interruptions due to implementing business systems; and rous other matters of national, regional and global scale, including those of a political, economic, business, competitive and
atory nature contained from time to time in our U.S. Securities and Exchange Commission filings, including, but not limited to, thors listed in the "Risk Factors" section located in Item 1A of Part II of our Form 10-K for the period ended July 31, 2007. These rtainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. Wndertake to update our forward-looking statements.
efer to certain non-GAAP financial measures in this presentation. Reconciliations of these non-GAAP financial measures to the mly comparable GAAP financial measures can be found within this presentation.
y
We identify and protectpremises, products and people
duc s
• With state of the art clean rooms and the latest in die-cut technology, Brady provides custom-designed products that seal, insulate, protect, shield or otherwise enhance mechanical performance.
Die Cut Wire Identification
• Brady’s labels, sleeves, printers and software provide the total labeling and documentation solution for wire identification
fety & facility p customers
maintain safer nments and regulatory
ty and fetyfication
High Performance Identification
• Brady uses materials expertise and printing technology to create identification and brand protection solutions that can withstand even the harshest environments.
PeopIdentific
• Brady helps ipeople and enhsecurity by ensright persons aright places at time.
Markets
• General Manufacturing• Maintenance• Safety• Process Industries• New Construction• Safety
Competition
• Fragmented competitor base• Local sign shops• No other global competitors• Regional players• Accuform• National Marker• Panduit
Growth
• Signs• Labels• Handheld Labelers and Supplies• Benchtop Printers and Supplies• Lockout/Tagout• Pipe and Value ID• Tags• Software• Data Collection
Products
y y
Organic• Upgraded Globalmarkand Handimark printing systems• Lockout Pro 3.0• Commercial Grade Signs• 1st catalogue in Seton China• Commercial buildings
Acquisitions• Sorbent Products• Clement Communications• Accidental First Aid• Personnel Concepts• Transposafe
Markets
• Mobile handset• Hard disk drive• Medical• Automotive• Consumer electronics
Competition Growth
• Die-cut adhesives, gaskets & seals• EMI/RFI shields• Dampers• Back light & anti-splinter films• Antennae, meshes, felts & insulators• Thermal management solutions• Test strips, electrodes, drug delivery & would care• Application equipment
Products
Organic• Consumer electronics• Medical market• Speaker adhesive with small holes & thin frames adapted for auto assembly• X-Y CU wrapped gasket• 3D gasket• HDD damping label• Automotive thermalsetadhesive
Acquisitions• Daewon• Tradex• QDPT
• Very fragmented by market segments & geography• Fabritech• Adampak• Zephyr• Marian Rubber
Markets
• Work-in Process ID• Mobile handset and electronics• Laboratory• Medical• Hard disk drive• Airline/Transportation/Automotive• Security/Brand protection
Competition
• Fragmented local and regional converters• 3M• Avery• Tyco• Zebra• Worldmark
Growth
• Bar code labels• Indicating labels• Covert and overt brand protection labels• RFID labels and tags• Handheld and benchtopprinters and supplies• Data collection• Software
Products
e o a ce de ca o
Organic• Consumer Electronics• Laboratory ID market• Medical market• LabXPert v2.0 Laboratory Labeling System• B-492 Freezer Bondz low temp labels
Acquisitions• Asterisco• Scafftag
Markets
• Electrical• Voice/Data Communications• General Manufacturing• Mass Transit
Competition
•Concentrated Competitor Base•Tyco•Raychem/Critchley•Panduit•Newell Rubbermaid•Dymo - Purchased 11/05•HellermannTyton
Growth
• Wire and Cable Markers• Wrap Around• Sleeves• Terminal Block Markers• Patch Panel, Outlet & Faceplate Markers• Portable & BenchtopLabeling Systems• Software
Products
e de ca o
Organic• IDXpert vZ•Brady PR 300 Plus Thermal Transfer Printer• NetDoc cable management system
Acquisitions• Modernotecnica• Caroll Australasia• Texit
Markets
• Employee ID• Visitor management• Access control• Customer facing
Competition
• Fragmented, regional competition• HID (Fargo)• Zebra• Datacard• Dymo• Evolis• Cardscan• Bristol ID Technologies• Laminex• All Safe• PC Nametag
Growth
• Name badges• Employee ID cards• Time expiring badges• Lanyards, badge holders & reels• Visitor management software• Printers/hardware
Products
p e de ca o
Organic• Premisys – new access control software/handware• OmniLife – new durable, secure and superior color ID card• Passage Point EDU visitor badging and management software for schools K-12
Acquisitions• CIPI• IdentiCard/IdentiCam• JAM• Stopware
ba ese ce 03 o 07
Total sites from 43 to 91. Total employees from 3,400 to 8,400
Americas:
esmillions)
MRO: OEM:
Europe:
Sales($ in millions)
MRO: OEM:
Asia/Pacific:
Sales($ in millions)
MRO: OEM:
Sites 15 24Employees 1,900 3,200
Sites 14 29Employees 1,000 1,550
Sites 15 38Employees 500 3,650
0
0
0
0
0
0
0
0
2003 2004 2005 2006 2007
299342
418499
610
0100200300400500600700
2003 2004 2005 2006 2007
198248 275
319417
0100200300400500600700
2003 2004 2005 2006 2007
58 81124
200
336
0
50
100
150
2003 2004 2005 2006 2007
Profit
1423 34
4957
0
50
100
150
2003 2004 2005 2006 2007
Profit
4766 80
84108
0
0
0
0
2003 2004 2005 2006 2007
fit
4260
98123
142
OEMCustomersApproximately
1/3MRO
CustomersApproximately
2/3
_____nt estimates and third-party sources.
& Facility IDDmaintenanceory IDoughly nominal
owth driversnd regulatory ncesecurity and vityble in natureer size
d user marketsed markets
MRO racteristics
•Products•Die Cut•High PerformanElectronics
•Wire ID – Originequipment
•Higher growth p(~2 x GDP), but cand highly comp
•Market growth d•Mobile Handset•Hard disk drives•Printed circuitboconsumer elect(labels)
•Heavily concentdeveloping coun
OEMCharacteri
FY 7/31/07 Net Sales$1.363 billion
dy s s o
Enabled By: To Achieve:
To Be the eader in the
Markets We Serve
To Be the eader in the
Markets We Serve
World Class People
Delivering Differentiated Solutions to
Loyal Customers
World Class People
Delivering Differentiated Solutions to
Loyal Customers
SustainableLong-TermShareholde
value
SustainableLong-TermShareholde
value
g S a e o de a ue C ea o$4
34
$463
$479 $5
51
$546
$517
$555 $6
71 $816
$1,4
11
$101
8
$136
3
1997 1999 2001 2003 2005 2007
ue Net Income($ in millions)
$27
$28
$32
$28 $4
0 $47
$28
$28
$21
$51
$82
$104 $1
09
1995 1997 1999 2001 2003 2005 2007
7% CAGR7% CAGR
25% CAGR
25% CAGR
50% C
AGR
50% C
AGR
rs equal TTM for the period ended October 31st 2007
TTM
Shareholder Value Creation
Leadership Position in
Niche Markets
Leadership Position in
Niche Markets
e e S a e o de a ue
Differentiated Solutions &
Commitment to Innovation
Differentiated Solutions &
Commitment to Innovation
Geographic, Customer &
Channel Diversity
Geographic, Customer &
Channel Diversity
OperationalExcellenceOperationalExcellence
World Class PeopWorld Class Peop
Disciplined Acquisition &
Integration Strateg
Disciplined Acquisition &
Integration Strateg
FOCUSDISCIPLINE
de s p os o c e a e s
participate in many fragmented et segments populated with er or regional competitors
adership position:elps us be a preferred supplierelps us sell at premium priceselps us to attract and maintain nt
r Goal is to be #1 or #2 in the niche markets in which we participr Goal is to be #1 or #2 in the niche markets in which we particip
Materials Systems Softwa
ea c a d e e op e
g quality products through a long mmitment to innovation, technology omer focus.
technical team has a highly diverse ills focusing on differentiated
s in materials, systems and software
n innovation, not “me too”ustomer application expertiseaterials Expertise
ommitment to continue to build our ies
rch & Developments)
GlobalMark2
IDXpertV2
Variquest Visual Learning ToolsBrand Protection Label
LED Adhesives
Low Temp Label
HDD Damping Label
Label Arc
ExpressionsID B
Lockout PR
PassagePoin04 2005 2006 2007 YTD
2008
1%+9%
+20%
+18%
IP Series Printer System
+5%
g ap c, Cus o e & C a e e s y
Multiple Cha
• Complete coveragmarket• Provides scalabilit• Greater opportuniacquisitions• Expertise in multipbusiness models
Global Presence
• More than 500,000customers• Broad penetration Fortune 1000• Diverse end marke
CustomeDiversity
Americas Asia Europe
We have geographic, channel, customer and end market diversity
d C ass eop e
e recruit people committed to cellence and invest in their potentiale generally have local nationals run cal businessese provide training in our code of ethics newly acquired companies and resher training to existing employeese have a strong Internal Audit function ich reports directly to the Audit mmittee
LEADERSHIP MODEL
Inspire One Another
Continuously Learn Moreand Coach Others
Hold Ourselves and Others Accountable
Be Bold and Decisive
Expect High Performanceof Ourselves and Others
Focus on the Customer
Practice the Values
The Brady culture: candid, collaborative and ethicalThe Brady culture: candid, collaborative and ethical
a o a ce e ce
Rigorous focus on monthly performance
Ongoing pipeline of profit mprovement initiatives
Centralization of distribution and shared services
High level of accountability drives success
10.6%
15.0% 15.4%
12.6%*
15
0%
10%
20%
2004 2005 2006 2007 Y2
trong margins are driven by continuous productivity improvementrong margins are driven by continuous productivity improvemen
Operating Margins
*Excluding F’08 cost reductions charges 13.
p q g gy
edicated experienced teamList” of candidates driven by strategy
op talent leads integration
• Quarterly review of integration results and opportunities
• A variant of EVA, SVE is a primarytool to gauge financial attractivene
Over $850 million invested in acquisitions since F’04
Over $850 million invested in acquisitions since F’04
Since F’96 we have acquired and integrated 50 companies providing new geographies, technologies, market expansion and increased market shareSince F’96 we have acquired and integrated 50 companies providing new geographies, technologies, market expansion and increased market share
Historical ROIC($ in millions)
0%
10%
20%
2003 2004 2005 2006 2007
13.0%14.5% 14.0%
10.1%
6.1%
Long-term,Sustainable Growth Strategy
wth Strategy
Business 5%+
SolutionsTechnologyMarkets
ational Excellenceentiated Solutions
Acquisitions
Productivi
Gross MarginsSG&AWorking Capit
Sales Growth 10%+
Net Income of 12% of sales
by F’2010
Increased Shareholder ValueIncreased Shareholder Value
We rigorously review and recalibrate strategies & initiatives for growth on a monthly basis
Common driver to be #1 or #2 in the markets we serveCommon driver to be #1 or #2 in the markets we serve
Organic Growth
5.7%
9.2%
4.2%5.1%
0%1%2%
3%4%5%6%
7%8%9%
10%
2004 2005 2006 2007
g
ographic expansionndia, Slovakia, Japan and S. Chinaw product developmentrady IP™ 300 and 600 Series PrintersMI Shielding & Acoustic Damping Label aser markable mobile handset SIM card
abelremiSys™ facility access control software
Varitronics VariQuest™ Visual Learning ools Systemw marketsab ID and Medical Die Cut
q
GeographicThailand, Modernotecnica)
Market shareDaewon, Tradex, Emedco, Signs & abels, Texit, Prinzing, Scafftag)
AdjacenciesPersonnel Concepts, CIPI, JAM,
TruMed, Clement, Sorbent Products Co., Transposafe)Technology or capabilitiesQDPT, Stopware, Asterisco)
Going forward: nice pipeline of MRO opportunities
12.7%16.0%
25.5%
7.59.7%
0%
5%
10%
15%
20%
25%
30%
2004 2005 2006 2007 YT20
Acquisition Growth
Striving to be #1 or #2 in the markets we serveStriving to be #1 or #2 in the markets we serve
g Ou o ab y a ge
Leverage from top line growth initiatives
Increasing Gross Margins• Facility rationalization• F’07 cost reduction activities• Better utilization of globalization
• SAP Productivity• High volume stock production(Mexico, Slovakia, China)
• China sourcing
Reducing SG&A• SAP Productivity• Telesales in Phillippines• Shared service in India
• Facility rationalization• F’07 cost reduction activities• Better utilization of globalization
og o s
•Forbes magazine’s Platinlist of America’s Best Big Companies
•BusinessWeek’s Hottest 1Growth Companies
•Business Ethics’ list of 10corporate citizens for 8th
consecutive year!
• Outstanding Corporate Growth Award from the Association for Corporate Growth (WI and National winner)
• Corporate Strategic Acquirer of the Year by M&A Advisor
• Wisconsin Manufacturer of the Year special award for corporate excellence
Financial Overview
y g
duction Charges ry - $M's Q1 Q2 Q3 Q4statement - Pre-tax 0.8 0.5 2.7 7.5Sheet 0.0 1.6 6.6 0.5arges 0.8 2.1 9.3 8.0
NI impact 0.6 0.4 1.9 5.4pact 0.01$ 0.01$ 0.03$ 0.10$
ples of Q4 cost reduction activities include:and reorganizationnued reorganization of Signs and Labels business in UKreorganizationy and Tradex Sweden reorganizationed Brandon US facility
ted annual pre-tax savings from F’07 cost reduction activities in F’08 ~
5%
10%
6%
6%
13%
3%
9%
16%
-1%4%
26%
4%
2%
8%
5%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
F04 F05 F06 F07 YTD
Currency
Acquisitions
Organic
ars ended July 31st)
14.4%
21% 22%
25%
34%
%
F04 F05 F06 F07 YTD F08
Operating Income %
Margin %
y
F04 F05 F06 F07 YTD F08
0%
3%
6%
9%
12%
15%
18%
Cost Red.Charges
0.6% 0.8%
GAAP 10.6% 15.0% 15.4% 12.6%
F04 F05 F06 F07
48.2%
51.5%
53.1%
31.7%
37.0%
35.0%
10.6%
15.0%
51.6%
33.3%
15.4%49.4%
33.0%
12.6%
g p
sh from Operating Activities
ollable Working Capital
Q1 F07 Q2 F07 Q3 F07 Q4 F07 Q1 F08
19.1%18.8% 18.9% 19.6% 19.0%• Incentives for fiscal 2008 include a
element for Working Capital management
• Slow start but beginning to see improvements
• Comparison at constant currencie
• Q1 F08 Cash from Operating Activat $34M, up 174% or $22M vs. p/y Q
• Record quarter for cash flow• Working capital focus paying off
Q1 Q2 Q3 Q4
F07 F08
p p
Debt / EBITDA vs. Net Debt/PF EBITDAng Balances
We maintain a conservative balance sheet with flexibility for future growth
We maintain a conservative balance sheet with flexibility for future growth
LT Debt less Cash and Cash Equivalents and ST Investments
500 313 236 237
Gross Debt Net Debt* Q1 TTM EBITDA
Q1 TTM PF EBITDA
22.2x
1.8x2.0x
2.3x
1.4x1.2x
1.4x1.6x
.0x
.5x
1.0x
1.5x
2.0x
2.5x
Q1 F'07 Q2 F'07 Q3 F'07 F'07 Q
p
us on profitability and working capital managementmplete capacity rationalization activitiesecute pipeline of profitability initiativesanic growthntinue investment and improvements in new product developmentographic expansionuisition growthegrate recent acquisitionsecute our current pipeline cute our current pipeline of profitability initiativestinue roll out of SAP
Contact:
Barbara BolensDirector, Investor Relations414-438-6940
And see our Web site at www.investor.bradycorp.com
y 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 incoexpense income taxes and depreciation and amortization EBITDA is not a calculation based on generally accepted accounting principles (GAAP) The
$ Thousands)
Q1 Q2 Q3 Q4 ToTDA (1)
Net income 34,448$ 19,709$ 28,987$ 26,244 109$ Interest expense 4,735 5,244 6,428 6,527 22 Income taxes 13,396 7,665 11,273 10,206 42 Depreciation and amortization 12,927 13,169 14,307 13,453 53
EBITDA (non-GAAP measure) 65,506$ 45,787$ 60,995$ 56,430$ 228$
Q1 Q2 Q3 Q4 ToTDA (1)
Net income 36,370$ Interest expense 6,720 Income taxes 15,366 Depreciation and amortization 14,168
EBITDA (non-GAAP measure) 72,624$
Fiscal 2008
Fiscal 2007
housands) Fiscal 2007
US GAAP
Cost Reduction Charges Adjusted US GAAP
Cost Reduction Charges Adj
$ 362,765 $ 362,765 $ 1,362,631 $ 1,3
rgin 173,604 $ 1,319 174,923 657,044 $ 1,319 6
expenses:ch and development 9,601 9,601 35,954 general and administrative 122,984 (6,149) 116,835 449,103 (10,107) 4 rating expenses 132,585 (6,149) 126,436 485,057 (10,107) 4
income 41,019 7,468 48,487 171,987 11,426 1
ome and (expense):ent and other income 1,958 1,958 2,875 expense (6,527) (6,527) (22,934) (
efore income taxes 36,450 7,468 43,918 151,928 11,426 1
xes 10,206 2,091 12,297 42,540 3,199
e $ 26,244 $ 5,377 $ 31,621 $ 109,388 $ 8,227 $ 1
A Nonvoting Common Share:et income $ 0.49 $ 0.10 $ 0.59 $ 2.03 $ 0.15 $ net income $ 0.48 $ 0.10 $ 0.58 $ 2.00 $ 0.15 $
B Voting Common Share:t i $ 0 49 $ 0 10 $ 0 59 $ 2 03 $ 0 15 $
Three Months Ended July 31st Twelve Months Ended July 31st