Add Line
MILWAUKEE--(BUSINESS WIRE)--Brady Corporation (NYSE: BRC) ("Brady" or "Company"), a world leader in identification solutions, today reported its financial results for its fiscal 2017 first quarter ended October 31, 2016.
Quarter Ended October 31, 2016 Financial Results:
Net earnings for the quarter ended October 31, 2016, increased 20.6 percent to $22.6 million compared to $18.7 million in the same quarter last year.
Earnings per diluted Class A Nonvoting Common Share increased 18.9 percent to $0.44 for the quarter ended October 31, 2016, compared to $0.37 in the same quarter last year.
Sales for the quarter ended October 31, 2016, decreased 1.0 percent to $280.2 million compared to $283.1 million in the same quarter last year. Total organic sales decreased 0.2 percent and foreign currency translation decreased sales by 0.8 percent. By segment, organic sales grew 0.7 percent in Identification Solutions and decreased 2.5 percent in Workplace Safety.
During the quarter ended October 31, 2016, the Company recast its historical segment financial information in response to two changes in its evaluation of segment financial performance.
First, the Company realigned certain businesses between its Workplace Safety segment and its Identification Solutions segment, resulting in increased revenues and segment profit in the Identification Solutions segment and equal and offsetting declines in revenues and segment profit in the Workplace Safety segment.
Second, the Company changed how it evaluates segment profit performance. Previously, administrative costs were excluded from the measure of segment profit. The Company's evaluation of segment profit has been recast to include certain administrative costs within each of the segments, such as the cost of finance, information technology, human resources, and certain other administrative costs. Interest expense, investment and other income (expense), income taxes and certain corporate administrative expenses continue to be excluded when evaluating segment performance.
Included in the accompanying financial information are the recast segment results for fiscal 2016.
Commentary:
"The Brady team is focused on producing high-quality products, providing excellent customer service, developing efficient and effective manufacturing processes, pushing for efficiencies in our SG&A structure, and building a culture where local teams are empowered to own and are held accountable for their financial results. This focus is working as evidenced by our fifth consecutive quarter of year-on-year earnings growth," said Brady's President and Chief Executive Officer, J. Michael Nauman. "Looking to the remainder of this fiscal year, we do not see a clear catalyst to accelerate global economic growth. In an environment such as this, focus and execution are critical. Our top priorities remain unchanged, which are to serve our customers extremely well, to grow our pipeline of innovative new products, and to deliver operational efficiencies in every facet of our business. We believe that our consistent focus on our long-term strategy has positioned Brady to compete effectively and deliver improved results to our shareholders."
"Although organic sales declined by 0.2 percent this quarter, profitability improved compared to last year as our focus on driving operational efficiencies and actively reducing our general and administrative structure provided financial benefits again this quarter. We also remain focused on the business fundamentals that drive cash generation in the short- and long-term. Cash provided by operating activities was $34.0 million this quarter and we finished with net debt of $49.7 million as of October 31, 2016 compared to net debt of $75.7 million at the beginning of the quarter," said Brady's Chief Financial Officer, Aaron Pearce. "As a result of our strong cash generation, our balance sheet provides significant flexibility for future investment and returning funds to our shareholders."
Fiscal 2017 Guidance:
The Company's earnings per diluted Class A Nonvoting Common Share guidance for the year ending July 31, 2017 remains unchanged at $1.55 to $1.70. Included in this guidance are organic sales ranging from a low single-digit decline to slightly positive growth for the year ending July 31, 2017, which is reflective of economic challenges in certain industrial markets and geographies, including North America. Offsetting this challenging revenue environment are ongoing efficiency gains in the Company's manufacturing facilities and selling, general, and administrative expenses. This guidance is based upon foreign currency exchange rates as of October 31, 2016, a full-year income tax rate of approximately 27 percent to 29 percent, capital expenditures approximating $25 million, and depreciation and amortization expense of $30 million.
A webcast regarding Brady's fiscal 2017 first quarter financial results will be available at www.bradycorp.com beginning at 9:30 a.m. Central Time today.
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, medical, aerospace and a variety of other industries. Brady is headquartered in Milwaukee, Wisconsin and as of July 31, 2016, employed approximately 6,500 people in its worldwide businesses. Brady's fiscal 2016 sales were approximately $1.12 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.
In this news release, statements that are not reported financial results or other historic information are "forward-looking statements." These forward-looking statements relate to, among other things, the Company's future financial position, business strategy, targets, projected sales, costs, earnings, capital expenditures, debt levels and cash flows, and plans and objectives of management for future operations.
The use of words such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "should," "project" or "plan" or similar terminology are generally intended to identify forward-looking statements. These forward-looking statements by their nature address matters that are, to different degrees, uncertain and are subject to risks, assumptions, and other factors, some of which are beyond Brady's control, that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For Brady, uncertainties arise from: our ability to compete effectively or to successfully execute our strategy; Brady's ability to develop technologically advanced products that meet customer demands; difficulties in protecting our websites, networks, and systems against security breaches; deterioration or instability in the global economy and financial markets; decreased demand for our products; Brady's ability to retain large customers; risks associated with the loss of key employees; Brady's ability to execute facility consolidations and maintain acceptable operational service metrics; extensive regulations by U.S. and non-U.S. governmental and self-regulatory entities; litigation, including product liability claims; divestitures and contingent liabilities from divestitures; Brady's ability to properly identify, integrate, and grow acquired companies; foreign currency fluctuations; potential write-offs of Brady's substantial intangible assets; changes in tax legislation and tax rates; differing interests of voting and non-voting shareholders; Brady's ability to meet certain financial covenants required by our debt agreements; numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive, and regulatory nature contained from time to time in Brady's U.S. Securities and Exchange Commission filings, including, but not limited to, those factors listed in the "Risk Factors" section within Item 1A of Part I of Brady's Form 10-K for the year ended July 31, 2016.
These uncertainties may cause Brady's actual future results to be materially different than those expressed in its forward-looking statements. Brady does not undertake to update its forward-looking statements except as required by law.
| BRADY CORPORATION AND SUBSIDIARIES | ||||||||
| CONSOLIDATED STATEMENTS OF EARNINGS | ||||||||
| (Unaudited; Dollars in thousands, except per share data) | ||||||||
| Three months ended October 31, | ||||||||
| 2016 | 2015 | |||||||
| Net sales | $ | 280,176 | $ | 283,073 | ||||
| Cost of products sold | 139,818 | 143,724 | ||||||
| Gross margin | 140,358 | 139,349 | ||||||
| Operating expenses: | ||||||||
| Research and development | 9,146 | 8,569 | ||||||
| Selling, general and administrative | 98,004 | 100,678 | ||||||
| Total operating expenses | 107,150 | 109,247 | ||||||
| Operating income | 33,208 | 30,102 | ||||||
| Other expense: | ||||||||
| Investment and other (expense) income | (489 | ) | (759 | ) | ||||
| Interest expense | (1,732 | ) | (2,151 | ) | ||||
| Earnings before income taxes | 30,987 | 27,192 | ||||||
| Income tax expense | 8,434 | 8,489 | ||||||
| Net earnings | $ | 22,553 | $ | 18,703 | ||||
| Net Earnings per Class A Nonvoting Common Share: | ||||||||
| Basic | $ | 0.45 | $ | 0.37 | ||||
| Diluted | $ | 0.44 | $ | 0.37 | ||||
| Dividends | $ | 0.21 | $ | 0.20 | ||||
| Net Earnings per Class B Voting Common Share: | ||||||||
| Basic | $ | 0.43 | $ | 0.35 | ||||
| Diluted | $ | 0.42 | $ | 0.35 | ||||
| Dividends | $ | 0.19 | $ | 0.19 | ||||
| Weighted average common shares outstanding (in thousands): | ||||||||
| Basic | 50,634 | 51,029 | ||||||
| Diluted | 51,455 | 51,089 | ||||||
| BRADY CORPORATION AND SUBSIDIARIES | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| (Unaudited; Dollars in thousands) | ||||||||
| October 31, 2016 | July 31, 2016 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 166,301 | $ | 141,228 | ||||
| Accounts receivable—net | 145,831 | 147,333 | ||||||
| Inventories: | ||||||||
| Finished products | 61,616 | 64,313 | ||||||
| Work-in-process | 16,971 | 16,678 | ||||||
| Raw materials and supplies | 18,815 | 18,436 | ||||||
| Total inventories | 97,402 | 99,427 | ||||||
| Prepaid expenses and other current assets | 20,392 | 19,436 | ||||||
| Total current assets | 429,926 | 407,424 | ||||||
| Other assets: | ||||||||
| Goodwill | 424,345 | 429,871 | ||||||
| Other intangible assets | 57,590 | 59,806 | ||||||
| Deferred income taxes | 23,032 | 27,238 | ||||||
| Other | 15,550 | 17,181 | ||||||
| Property, plant and equipment: | ||||||||
| Cost: | ||||||||
| Land | 7,267 | 5,809 | ||||||
| Buildings and improvements | 95,288 | 95,355 | ||||||
| Machinery and equipment | 255,544 | 256,549 | ||||||
| Construction in progress | 2,093 | 2,842 | ||||||
| 360,192 | 360,555 | |||||||
| Less accumulated depreciation | 260,368 | 258,111 | ||||||
| Property, plant and equipment—net | 99,824 | 102,444 | ||||||
| Total | $ | 1,050,267 | $ | 1,043,964 | ||||
| LIABILITIES AND STOCKHOLDERS' INVESTMENT | ||||||||
| Current liabilities: | ||||||||
| Notes payable | $ | 5,354 | $ | 4,928 | ||||
| Accounts payable | 58,011 | 62,245 | ||||||
| Wages and amounts withheld from employees | 49,510 | 45,998 | ||||||
| Taxes, other than income taxes | 7,373 | 7,403 | ||||||
| Accrued income taxes | 3,219 | 6,136 | ||||||
| Other current liabilities | 42,031 | 40,017 | ||||||
| Total current liabilities | 165,498 | 166,727 | ||||||
| Long-term obligations, less current maturities | 210,608 | 211,982 | ||||||
| Other liabilities | 60,107 | 61,657 | ||||||
| Total liabilities | 436,213 | 440,366 | ||||||
| Stockholders' investment: | ||||||||
| Common stock: | ||||||||
| Class A nonvoting common stock—Issued 51,261,487 and 51,261,487 shares, respectively and outstanding 47,334,496 and 46,920,974 shares, respectively | 513 | 513 | ||||||
| Class B voting common stock—Issued and outstanding, 3,538,628 shares | 35 | 35 | ||||||
| Additional paid-in capital | 317,044 | 317,001 | ||||||
| Earnings retained in the business | 465,554 | 453,371 | ||||||
| Treasury stock—3,926,991 and 4,340,513 shares, respectively of Class A nonvoting common stock, at cost | (97,840 | ) | (108,714 | ) | ||||
| Accumulated other comprehensive loss | (66,914 | ) | (54,745 | ) | ||||
| Other | (4,338 | ) | (3,863 | ) | ||||
| Total stockholders' investment | 614,054 | 603,598 | ||||||
| Total | $ | 1,050,267 | $ | 1,043,964 | ||||
| BRADY CORPORATION AND SUBSIDIARIES | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (Unaudited; Dollars in thousands) | ||||||||
| Three months ended October 31, | ||||||||
| 2016 | 2015 | |||||||
| Operating activities: | ||||||||
| Net earnings | $ | 22,553 | $ | 18,703 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 7,234 | 8,889 | ||||||
| Non-cash portion of stock-based compensation expense | 3,155 | 2,596 | ||||||
| Deferred income taxes | 2,027 | 726 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (680 | ) | (3,342 | ) | ||||
| Inventories | 1,197 | 1,368 | ||||||
| Prepaid expenses and other assets | (1,170 | ) | (3,081 | ) | ||||
| Accounts payable and accrued liabilities | 2,546 | 2,402 | ||||||
| Income taxes | (2,869 | ) | 2,109 | |||||
| Net cash provided by operating activities | 33,993 | 30,370 | ||||||
| Investing activities: | ||||||||
| Purchases of property, plant and equipment | (3,959 | ) | (2,334 | ) | ||||
| Other | 1,511 | 1,539 | ||||||
| Net cash used in investing activities | (2,448 | ) | (795 | ) | ||||
| Financing activities: | ||||||||
| Payment of dividends | (10,370 | ) | (10,183 | ) | ||||
| Proceeds from exercise of stock options | 8,813 | — | ||||||
| Purchase of treasury stock | — | (16,160 | ) | |||||
| Net proceeds (repayments) from borrowing on credit facilities | 426 | (2,738 | ) | |||||
| Debt issuance costs | — | (803 | ) | |||||
| Income tax on equity-based compensation, and other | (1,232 | ) | (1,007 | ) | ||||
| Net cash used in financing activities | (2,363 | ) | (30,891 | ) | ||||
| Effect of exchange rate changes on cash | (4,109 | ) | (2,566 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | 25,073 | (3,882 | ) | |||||
| Cash and cash equivalents, beginning of period | 141,228 | 114,492 | ||||||
| Cash and cash equivalents, end of period | $ | 166,301 | $ | 110,610 | ||||
| BRADY CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||||||
| SEGMENT INFORMATION | ||||||||||||||||||||||||
| (Unaudited; Dollars in thousands) | ||||||||||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||||||||||
| October 31, 2016 | October 31, 2015 | January 31, 2016 | April 30, 2016 | July 31, 2016 | July 31, 2016 | |||||||||||||||||||
| SALES TO EXTERNAL CUSTOMERS | ||||||||||||||||||||||||
| ID Solutions | $ | 201,264 | $ | 201,020 | $ | 189,780 | $ | 201,482 | $ | 203,229 | $ | 795,511 | ||||||||||||
| Workplace Safety | 78,912 | 82,053 | 78,850 | 85,334 | 78,877 | 325,114 | ||||||||||||||||||
| Total | $ | 280,176 | $ | 283,073 | $ | 268,630 | $ | 286,816 | $ | 282,106 | $ | 1,120,625 | ||||||||||||
| SALES INFORMATION | ||||||||||||||||||||||||
| ID Solutions | ||||||||||||||||||||||||
| Organic | 0.7 | % | (2.2 | )% | 0.9 | % | (0.9 | )% | (0.6 | )% | (0.7 | )% | ||||||||||||
| Currency | (0.6 | )% | (5.4 | )% | (4.6 | )% | (1.1 | )% | (1.2 | )% | (3.1 | )% | ||||||||||||
| Total | 0.1 | % | (7.6 | )% | (3.7 | )% | (2.0 | )% | (1.8 | )% | (3.8 | )% | ||||||||||||
| Workplace Safety | ||||||||||||||||||||||||
| Organic | (2.5 | )% | (2.2 | )% | (0.6 | )% | 1.7 | % | (1.8 | )% | (0.7 | )% | ||||||||||||
| Currency | (1.3 | )% | (9.8 | )% | (7.2 | )% | (0.9 | )% | (1.8 | )% | (5.0 | )% | ||||||||||||
| Total | (3.8 | )% | (12.0 | )% | (7.8 | )% | 0.8 | % | (3.6 | )% | (5.7 | )% | ||||||||||||
| Total Company | ||||||||||||||||||||||||
| Organic | (0.2 | )% | (2.2 | )% | 0.4 | % | (0.1 | )% | (0.9 | )% | (0.7 | )% | ||||||||||||
| Currency | (0.8 | )% | (6.6 | )% | (5.4 | )% | (1.1 | )% | (1.4 | )% | (3.7 | )% | ||||||||||||
| Total | (1.0 | )% | (8.8 | )% | (5.0 | )% | (1.2 | )% | (2.3 | )% | (4.4 | )% | ||||||||||||
| SEGMENT PROFIT | ||||||||||||||||||||||||
| ID Solutions | $ | 33,068 | $ | 25,431 | $ | 23,056 | $ | 31,898 | $ | 31,891 | $ | 112,276 | ||||||||||||
| Workplace Safety | 6,450 | 9,382 | 6,296 | 6,012 | 9,102 | 30,792 | ||||||||||||||||||
| Total | $ | 39,518 | $ | 34,813 | $ | 29,352 | $ | 37,910 | $ | 40,993 | $ | 143,068 | ||||||||||||
| SEGMENT PROFIT AS A PERCENT OF SALES | ||||||||||||||||||||||||
| ID Solutions | 16.4 | % | 12.7 | % | 12.1 | % | 15.8 | % | 15.7 | % | 14.1 | % | ||||||||||||
| Workplace Safety | 8.2 | % | 11.4 | % | 8.0 | % | 7.0 | % | 11.5 | % | 9.5 | % | ||||||||||||
| Total | 14.1 | % | 12.3 | % | 10.9 | % | 13.2 | % | 14.5 | % | 12.8 | % | ||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||||||||||
| October 31, 2016 | October 31, 2015 | January 31, 2016 | April 30, 2016 | July 31, 2016 | July 31, 2016 | |||||||||||||||||||
| Total segment profit | $ | 39,518 | $ | 34,813 | $ | 29,352 | $ | 37,910 | $ | 40,993 | $ | 143,068 | ||||||||||||
| Unallocated amounts: | ||||||||||||||||||||||||
| Administrative costs | (6,310 | ) | (4,711 | ) | (5,763 | ) | (7,126 | ) | (7,590 | ) | (25,190 | ) | ||||||||||||
| Investment and other (expense) income | (489 | ) | (759 | ) | (992 | ) | 721 | 321 | (709 | ) | ||||||||||||||
| Interest expense | (1,732 | ) | (2,151 | ) | (2,130 | ) | (1,838 | ) | (1,705 | ) | (7,824 | ) | ||||||||||||
| Earnings before income taxes | $ | 30,987 | $ | 27,192 | $ | 20,467 | $ | 29,667 | $ | 32,019 | $ | 109,345 | ||||||||||||