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Brady Corporation Reports Fiscal 2017 Second Quarter Results and Increases its Fiscal 2017 EPS Guidance

  • Earnings per diluted Class A Nonvoting Common Share was $0.49 in the second quarter of fiscal 2017 compared to $0.30 in the same quarter of the prior year.  Results for the quarter include $0.09 per share of discrete tax benefits.
  • Organic revenue growth was 1.3 percent for the quarter ended January 31, 2017.
  • Net debt was $37.7 million at January 31, 2017 compared to $132.5 million at January 31, 2016; providing flexibility for future investments.
  • Earnings per diluted Class A Common Share guidance for the full year ending July 31, 2017 increased from a range of $1.55 to $1.70 to a range of $1.75 to $1.85.

MILWAUKEE, Feb. 23, 2017 (GLOBE NEWSWIRE) -- Brady Corporation (NYSE:BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2017 second quarter ended January 31, 2017.

Quarter Ended January 31, 2017 Financial Results:
Net earnings for the quarter ended January 31, 2017, were $25.3 million compared to $15.3 million in the same quarter last year.

Earnings per diluted Class A Nonvoting Common Share were $0.49 for the quarter ended January 31, 2017, compared to $0.30 in the same quarter last year. 
During the quarter ended January 31, 2017, the Company’s effective tax rate was 13.1%, which was impacted by certain one-time tax benefits from a cash repatriation.  The one-time tax items benefited earnings per diluted Class A Nonvoting Common Share by approximately $0.09 during the quarter.  Our historical average effective tax rate is approximately 28%. 

Sales for the quarter ended January 31, 2017, decreased 0.2 percent to $268.0 million compared to $268.6 million in the same quarter last year.  Total organic sales increased 1.3 percent while the impact of foreign currency translation decreased sales by 1.5 percent.  By segment, organic sales increased 1.9 percent in Identification Solutions and decreased 0.2 percent in Workplace Safety.

Six-Month Period Ended January 31, 2017 Financial Results:
Net earnings for the six-month period ended January 31, 2017, were $47.9 million compared to $34.0 million in the same quarter last year.

Earnings per diluted Class A Nonvoting Common Share were $0.93 for the six-month period ended January 31, 2017, compared to $0.67 in the same period in fiscal 2016.

During the six-month period ended January 31, 2017, the Company’s effective tax rate was 20.4%, which was impacted by certain one-time tax benefits from a cash repatriation.  The one-time tax items benefited earnings per diluted Class A Nonvoting Common Share by approximately $0.09 during the six-month period.

Sales for the six-month period ended January 31, 2017, decreased 0.6 percent to $548.2 million compared to $551.7 million in the same quarter last year.  Total organic sales increased 0.5 percent while foreign currency translation decreased sales by 1.1 percent.  By segment, organic sales increased 1.3 percent in Identification Solutions and decreased 1.3 percent in Workplace Safety.

Commentary:
“Our continued focus on developing high-quality products, identifying efficiencies in our SG&A structure, and driving a culture of local ownership and accountability is working.  This quarter marks our sixth consecutive quarter of year-over-year earnings growth.  Our actions to improve organic sales are also working as we realized organic sales growth of 1.3 percent this quarter and are at 0.5 percent organic sales growth year-to-date.  However, we do expect to see choppy organic growth patterns in the future as our initiatives gain traction and due to fewer billing days in the second half of fiscal 2017,” said Brady’s President and Chief Executive Officer, J. Michael Nauman.  “We believe our actions are starting to result in long-term positive organic sales trends, which we expect will translate into future profit improvements.  Looking forward, our priorities remain unchanged, which are to grow our pipeline of innovative new products, deliver efficiency gains, and serve our customers extremely well.  We are pleased that we have been able to consistently improve our performance while simultaneously driving our long-term strategy.”

“We continue to see profitability improvements as we focus on driving efficiencies throughout our manufacturing operations while actively reducing our selling, general and administrative expense structure, all while investing in organic growth opportunities,” said Brady’s Chief Financial Officer, Aaron Pearce.  “Cash generation for the quarter ended January 31, 2017, was below that of last year due to the timing of certain payments.  After taking the impact of these timing items into account, it is clear that our trend of solid cash generation continues as we finished with net debt of $37.7 million as of January 31, 2017, compared to net debt of $132.5 million as of January 31, 2016.  As a result of this cash generation, our balance sheet is solid and provides significant flexibility for future investment and returning funds to our shareholders.”

Fiscal 2017 Guidance:
The Company is increasing its earnings per diluted Class A Common Share guidance from a range of $1.55 to $1.70 to a range of $1.75 to $1.85 for the full year ending July 31, 2017.  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.  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 January 31, 2017, a full-year income tax rate in the mid-20 percent range, depreciation and amortization expense of $30 million, and capital expenditures approximating $20 million.

A webcast regarding Brady’s fiscal 2017 second 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; changes in tax legislation and tax rates; 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; 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 January 31,   Six months ended January 31,
      2017       2016       2017       2016  
Net sales   $   268,001     $   268,630     $   548,177     $   551,703  
Cost of products sold      133,843        135,738        273,661        279,462  
Gross margin      134,158        132,892        274,516        272,241  
Operating expenses:                
Research and development      9,481        9,097        18,627        17,666  
Selling, general and administrative      94,715        100,206        192,719        200,884  
Total operating expenses      104,196        109,303        211,346        218,550  
                 
Operating income       29,962        23,589        63,170        53,691  
                 
Other income (expense):                
Investment and other income (expense)       596        (992 )      107        (1,751 )
Interest expense      (1,458 )      (2,130 )      (3,190 )      (4,281 )
                 
Earnings before income taxes      29,100        20,467        60,087        47,659  
                 
Income tax expense      3,803        5,177        12,237        13,666  
                 
Net earnings   $   25,297     $   15,290     $   47,850     $   33,993  
                 
Net earnings per Class A Nonvoting Common Share:                
Basic    $   0.50     $   0.30     $   0.94     $   0.67  
Diluted    $   0.49     $   0.30     $   0.93     $   0.67  
Dividends   $   0.21     $   0.20     $   0.41     $   0.41  
                 
Net earnings per Class B Voting Common Share:                
Basic    $   0.50     $   0.30     $   0.93     $   0.65  
Diluted    $   0.49     $   0.30     $   0.91     $   0.65  
Dividends   $   0.21     $   0.20     $   0.39     $   0.39  
                 
Weighted average common shares outstanding (in thousands):                
Basic      51,054        50,527        50,844        50,778  
Diluted      51,954        50,647        51,721        50,868  

 

BRADY CORPORATION AND SUBSIDIARIES      
CONSOLIDATED BALANCE SHEETS      
(Unaudited; Dollars in thousands)      
       
  January 31, 2017   July 31, 2016
ASSETS      
Current assets:      
Cash and cash equivalents $   125,208     $   141,228  
Accounts receivable—net    140,018        147,333  
Inventories:      
Finished products    60,642        64,313  
Work-in-process    17,029        16,678  
Raw materials and supplies    19,737        18,436  
Total inventories    97,408        99,427  
Prepaid expenses and other current assets    19,051        19,436  
Total current assets    381,685        407,424  
Other assets:      
Goodwill    424,857        429,871  
Other intangible assets    55,980        59,806  
Deferred income taxes    27,403        27,238  
Other    16,327        17,181  
Property, plant and equipment:      
Cost:      
Land    7,272        5,809  
Buildings and improvements    94,542        95,355  
Machinery and equipment    254,688        256,549  
Construction in progress    3,168        2,842  
     359,670        360,555  
Less accumulated depreciation    262,786        258,111  
Property, plant and equipment—net    96,884        102,444  
Total $   1,003,136     $   1,043,964  
LIABILITIES AND STOCKHOLDERS’ INVESTMENT      
Current liabilities:      
Notes payable $   5,691     $   4,928  
Accounts payable    58,515        62,245  
Wages and amounts withheld from employees    39,157        45,998  
Taxes, other than income taxes    6,617        7,403  
Accrued income taxes    2,011        6,136  
Other current liabilities    38,210        40,017  
Total current liabilities    150,201        166,727  
Long-term obligations, less current maturities    157,223        211,982  
Other liabilities    60,820        61,657  
Total liabilities    368,244        440,366  
Stockholders’ investment:      
Common stock:      
Class A nonvoting common stock—Issued 51,261,487 and 51,261,487 shares, respectively and outstanding 47,594,684 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    317,587        317,001  
Earnings retained in the business    480,368        453,371  
Treasury stock—3,666,803 and 4,340,513 shares, respectively of Class A nonvoting common stock, at cost    (90,998 )      (108,714 )
Accumulated other comprehensive loss    (68,214 )      (54,745 )
Other    (4,399 )      (3,863 )
Total stockholders’ investment    634,892        603,598  
Total $   1,003,136     $   1,043,964  

 

BRADY CORPORATION AND SUBSIDIARIES      
CONSOLIDATED STATEMENTS OF CASH FLOWS      
(Unaudited; Dollars in thousands)      
  Six months ended January 31,
    2017       2016  
Operating activities:      
Net earnings $   47,850     $   33,993  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization    14,102        17,502  
Stock-based compensation expense    5,394        4,569  
Deferred income taxes    (4,547 )      3,338  
Changes in operating assets and liabilities:      
Accounts receivable    3,407        3,204  
Inventories    224        3,403  
Prepaid expenses and other assets    220        (3,811 )
Accounts payable and other liabilities    (9,384 )      (1,618 )
Income taxes    (3,932 )      (2,326 )
Net cash provided by operating activities    53,334        58,254  
       
Investing activities:      
Purchases of property, plant and equipment    (7,235 )      (3,928 )
Other    593        2,521  
Net cash used in investing activities    (6,642 )      (1,407 )
       
Financing activities:      
Payment of dividends    (20,852 )      (20,425 )
Proceeds from exercise of stock options    14,659        53  
Purchase of treasury stock    —        (23,397 )
Repayment of borrowing on credit facilities    (50,469 )      (437 )
Debt issuance costs    —        (803 )
Income tax on equity-based compensation, and other    (640 )      (1,299 )
Net cash used in financing activities    (57,302 )      (46,308 )
       
Effect of exchange rate changes on cash    (5,410 )      (4,833 )
       
Net (decrease) increase in cash and cash equivalents    (16,020 )      5,706  
Cash and cash equivalents, beginning of period    141,228        114,492  
       
Cash and cash equivalents, end of period $   125,208     $   120,198  

 

BRADY CORPORATION AND SUBSIDIARIES              
SEGMENT INFORMATION              
(Unaudited; Dollars in thousands)              
               
  Three Months Ended January 31,   Six Months Ended January 31,
    2017       2016       2017       2016  
SALES TO EXTERNAL CUSTOMERS              
ID Solutions $   190,962     $   189,780     $   392,226     $   390,800  
Workplace Safety     77,039         78,850         155,951         160,903  
Total $   268,001     $   268,630     $   548,177     $   551,703  
               
SALES INFORMATION              
ID Solutions              
Organic   1.9 %     0.9 %     1.3 %     (0.7 )%
Currency   (1.3 )%     (4.6 )%     (0.9 )%     (5.0 )%
Total   0.6 %     (3.7 )%     0.4 %     (5.7 )%
Workplace Safety              
Organic   (0.2 )%     (0.6 )%     (1.3 )%     (1.4 )%
Currency   (2.1 )%     (7.2 )%     (1.8 )%     (8.5 )%
Total   (2.3 )%     (7.8 )%     (3.1 )%     (9.9 )%
Total Company              
Organic    1.3 %     0.4 %     0.5 %     (0.9 )%
Currency   (1.5 )%     (5.4 )%     (1.1 )%     (6.0 )%
Total   (0.2 )%     (5.0 )%     (0.6 )%     (6.9 )%
               
SEGMENT PROFIT              
ID Solutions $   28,961     $   23,056     $   62,035     $   48,487  
Workplace Safety     6,059         6,296         12,504         15,678  
Total $   35,020     $   29,352     $   74,539     $   64,165  
SEGMENT PROFIT AS A PERCENT OF SALES              
ID Solutions   15.2 %     12.1 %     15.8 %     12.4 %
Workplace Safety   7.9 %     8.0 %     8.0 %     9.7 %
Total   13.1 %     10.9 %     13.6 %     11.6 %
               
               
  Three Months Ended January 31,   Six Months Ended January 31,
    2017       2016       2017       2016  
Total segment profit $   35,020     $   29,352     $   74,539     $   64,165  
Unallocated amounts:              
Administrative costs     (5,058 )       (5,763 )       (11,369 )       (10,474 )
Investment and other income (expense)     596         (992 )       107         (1,751 )
Interest expense     (1,458 )       (2,130 )       (3,190 )       (4,281 )
Earnings before income taxes $   29,100     $   20,467     $   60,087     $   47,659  

 

For More Information:
Investor contact:  Ann Thornton 414-438-6887
Media contact:  Kate Venne 414-358-5176

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