Q2 2013 Earnings Call
February 21, 2013 10:30 am ET
Aaron J. Pearce - Vice President, Director of Investor Relations and Treasurer
Frank M. Jaehnert - Chief Executive Officer, President and Director
Thomas J. Felmer - Chief Financial Officer and Senior Vice President
Matthew O. Williamson - Vice President and President of Brady Americas
Peter C. Sephton - Vice President and President of Brady EMEA
Stephen Millar - Vice President and President of Brady Asia-Pacific
Jason Ursaner - CJS Securities, Inc.
Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division
George L. Staphos - BofA Merrill Lynch, Research Division
Good day, ladies and gentlemen, and welcome to the Second Quarter 2013 Brady Corporation Earnings Conference Call. My name is Ann, and I will be your coordinator for today's call. As a reminder, this conference is being recorded for replay purposes. [Operator Instructions]
I would now like to turn the presentation over to your host for today's call, Mr. Aaron Pearce, Director of Investor Relations. Please proceed, sir.
Aaron J. Pearce
Thank you, Ann. Good morning, and welcome to the Brady Corporation Fiscal 2013 Second Quarter Conference Call. During the call this morning, you'll hear from Frank Jaehnert, Brady's CEO; and Tom Felmer, Brady's CFO; as well as our 3 regional presidents: Stephen Millar, President of the Asia Pacific region; Peter Sephton, EMEA President; and Matt Williamson, President of the Americas region. After the prepared remarks by the team, we'll open up the call to questions. The slides for this morning's call are located on our website at www.bradycorp.com.
Please note that, during this call, we may make comments about forward-looking information. Words such as expect, believe, forecast and anticipate are a few examples of words identifying a forward-looking statement. It's important to note that forward-looking information is subject to various risk factors and uncertainties which could significantly impact expected results. Risk factors were noted in our news release this morning and in Brady's latest Form 10-K which was filed with the SEC in September 2012.
Also please note that this teleconference is copyrighted by Brady Corporation and may not be rebroadcast without the consent of Brady. We will be recording this call and broadcasting it on the Internet. Your participation in the Q&A session will constitute your consent to being recorded. Thank you.
And now I'll turn the call over to Brady's CEO, Frank Jaehnert. Frank?
Frank M. Jaehnert
Good morning, and thank you for joining us.
This quarter, we grew sales by 1.1%. The acquisition of PDC, net of divestitures, increased sales by 4%, while organic sales declined 3.1%. Business conditions remained challenging in Europe, resulting in an organic revenue decline. As such, we have been shifting our resources to the highest-growth opportunities which include expanding our business in Central Europe, the Middle East and Africa. The Americas grew by 6.7%, including 0.6% increase in organic sales.
We continued to see positive growth in our U.S. Identification Solutions business, while our Direct Marketing and Brazil businesses contracted. The trends in our Asia business are consistent with what we experienced last quarter, and our Australian business is suffering due to the macroeconomic slowdown. And our Thailand business, which is focused on the hard disk drive industry, has contracted more than anticipated compared to the first quarter. You will hear more about business conditions from Tom and the group presidents later in the call.
Moving on. Slide 3 gives a bit more commentary on our December 28 acquisition of Precision Dynamics Corporation. This was the largest acquisition in the history of Brady, with a purchase price of $301 million and $173 million of revenues in calendar 2012. Approximately 85% of PDC's revenues come from the sale of identification products such as labels and wristbands to the healthcare industry, with the remaining 15% of sales coming from the sale of identification products to the leisure and entertainment sectors. The acquisition of PDC late [ph] in the U.S. healthcare identification space is a significant step forward in our movement to faster-growing industries with less cyclicality.
Slide 4 provides a summary of the anticipated financial impact of PDC. We expect PDC to provide approximately $0.05 to $0.07 of diluted EPS accretion in fiscal 2013 and $0.10 to $0.15 accretion in fiscal 2014. I've met many of the key managers of PDC and I'm quite impressed with the team. And I believe we have a great cultural fit and then experience in either revenue and profitability growth in the healthcare identification space over the next several years.
Moving to Slide #5. In this morning's news release, we announced a reorganization of our business, moving from a geographic-focused organization to an organization structured around 3 global business platforms. This change is part of our strategy to improve organic growth and profitability. We will start to operate under the 3 business platforms of Identification Solutions, Workplace Safety and Die-Cut in May 2013.
Our Identification Solutions business will be led by Matt Williamson. And they will continue to focus on innovative identification solutions for a broad range of applications, including wire identification, product identification, safety and facility identification, people identification and healthcare identification. We will continue to identify more opportunities to leverage our identification capabilities, including expanding our product line or broad line of high-performance identification products and new product capabilities in faster-growing geographies and faster-growing and less-cyclical sectors such as healthcare.
In our Workplace Safety business, under the leadership of Scott Hoffman, we will be expanding our focus on the Internet and offering a broader set of workplace safety products that our customers want and need. By expanding the scope of products in our Workplace Safety business, we can leverage our broad customer reach and compliance knowledge to provide greater opportunities for organic growth around the globe.
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