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Brady Corporation

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Brady Corporation Reports Fiscal 2017 Third Quarter Results and Tightens its Fiscal 2017 EPS Guidance

  • Earnings per diluted Class A Nonvoting Common Share were $0.43 in the third quarter of fiscal 2017 compared to $0.42 in the same quarter of the prior year. 
  • Organic revenue declined 1.9 percent for the quarter ended April 30, 2017.
  • Net debt was $8.9 million at April 30, 2017 compared to $100.9 million at April 30, 2016, providing flexibility for future investments.
  • Earnings per diluted Class A Common Share guidance for the full year ending July 31, 2017 tightened from a range of $1.75 to $1.85 to a range of $1.80 to $1.85.

MILWAUKEE, May 25, 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 third quarter ended April 30, 2017. 

Quarter Ended April 30, 2017 Financial Results:  

Net earnings for the quarter ended April 30, 2017, were $22.6 million compared to $21.0 million in the same quarter last year.

Earnings per diluted Class A Nonvoting Common Share were $0.43 for the quarter ended April 30, 2017, compared to $0.42 in the same quarter last year.

Sales for the quarter ended April 30, 2017, decreased 3.8 percent to $275.9 million compared to $286.8 million in the same quarter last year.  Total organic sales decreased 1.9 percent and the impact of foreign currency translation decreased sales by 1.9 percent.  By segment, organic sales decreased 0.8 percent in Identification Solutions and decreased 4.6 percent in Workplace Safety.

Nine-Month Period Ended April 30, 2017 Financial Results:

Net earnings for the nine-month period ended April 30, 2017, were $70.4 million compared to $55.0 million in the same period last year.

Earnings per diluted Class A Nonvoting Common Share were $1.36 for the nine-month period ended April 30, 2017, compared to $1.08 in the same period last year.

Sales for the nine-month period ended April 30, 2017, decreased 1.7 percent to $824.1 million compared to $838.5 million in the same period last year.  Total organic sales decreased 0.3 percent and foreign currency translation decreased sales by 1.4 percent.  By segment, organic sales increased 0.6 percent in Identification Solutions and decreased 2.5 percent in Workplace Safety.

Commentary:

“Our consistent focus on developing high-quality products, providing excellent customer service, pushing for efficiencies throughout our SG&A structure, and empowering the Brady team with local ownership and accountability are the primary drivers of our improved financial results.  This quarter marks our seventh consecutive quarter of year-over-year earnings growth,” said Brady’s President and Chief Executive Officer, J. Michael Nauman.  “We believe that our focus on driving efficiencies combined with our organic sales initiatives and our new product pipeline is beginning to generate improved organic sales trends, and will continue to drive future profit improvements.  That said, challenges in the distribution channel will impact our Workplace Safety business while we are more optimistic about growth in the fourth quarter in Identification Solutions.  Looking forward, our priorities remain unchanged, which are to grow our pipeline of innovative new products, provide excellent customer service and deliver operational efficiencies.  We are pleased with our ability to improve our financial performance while maintaining our focus on our long-term strategy.”

“Third quarter revenues were approximately in line with our expectations coming into the quarter, finishing with an organic sales decline of 1.9 percent.  Our third quarter was impacted by fewer billing days compared to the same quarter in the prior year.  Organic sales were up 0.7% on a per day basis.  Our ability to drive operational efficiencies and actively reduce our general and administrative structure provided financial benefits this quarter,” said Brady’s Chief Financial Officer, Aaron Pearce.  “Cash generation for the quarter ended April 30, 2017 continued to be strong, as we finished with net cash provided by operating activities of $37.8 million while reducing our net debt by $28.8 million this quarter.  Our strong balance sheet provides significant flexibility for future investments in new products and returning funds to our shareholders.”

Fiscal 2017 Guidance:

The Company is tightening its earnings per diluted Class A Common Share guidance from a range of $1.75 to $1.85 to a range of $1.80 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 April 30, 2017, a full-year income tax rate in the mid-20 percent range, depreciation and amortization expense of $28 million, and capital expenditures approximating $17 million.

A webcast regarding Brady’s fiscal 2017 third 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 April 30,   Nine months ended April 30,  
    2017       2016       2017       2016    
Net sales $   275,927     $   286,816     $   824,104     $   838,519    
Cost of products sold    136,018        141,373        409,679        420,835    
Gross margin    139,909        145,443        414,425        417,684    
Operating expenses:                
Research and development    9,950        8,865        28,577        26,531    
Selling, general and administrative    98,409        105,794        291,128        306,678    
Total operating expenses    108,359        114,659        319,705        333,209    
                 
Operating income     31,550        30,784        94,720        84,475    
                 
Other income (expense):                
Investment and other income (expense)     453        721        560        (1,030 )  
Interest expense    (1,375 )      (1,838 )      (4,565 )      (6,119 )  
                 
Earnings before income taxes    30,628        29,667        90,715        77,326    
                 
Income tax expense    8,075        8,686        20,312        22,352    
                 
Net earnings $   22,553     $   20,981     $   70,403     $   54,974    
                 
Net earnings per Class A Nonvoting Common Share:                
Basic  $   0.44     $   0.42     $   1.38     $   1.09    
Diluted  $   0.43     $   0.42     $   1.36     $   1.08    
Dividends $   0.21     $   0.20     $   0.62     $   0.61    
                 
Net earnings per Class B Voting Common Share:                
Basic  $   0.44     $   0.42     $   1.37     $   1.07    
Diluted  $   0.43     $   0.42     $   1.34     $   1.07    
Dividends $   0.21     $   0.20     $   0.60     $   0.59    
                 
Weighted average common shares outstanding (in thousands):                
Basic    51,227        50,251        50,972        50,602    
Diluted    52,201        50,505        51,882        50,747    
                 

 

BRADY CORPORATION AND SUBSIDIARIES      
CONSOLIDATED BALANCE SHEETS      
(Unaudited; Dollars in thousands)      
       
  April 30, 2017   July 31, 2016
ASSETS      
Current assets:      
Cash and cash equivalents $   129,077     $   141,228  
Accounts receivable—net    145,755        147,333  
Inventories:      
Finished products    61,025        64,313  
Work-in-process    17,326        16,678  
Raw materials and supplies    19,126        18,436  
Total inventories    97,477        99,427  
Prepaid expenses and other current assets    20,343        19,436  
Total current assets    392,652        407,424  
Other assets:      
Goodwill    425,935        429,871  
Other intangible assets    54,107        59,806  
Deferred income taxes    26,228        27,238  
Other    18,152        17,181  
Property, plant and equipment:      
Cost:      
Land    7,271        5,809  
Buildings and improvements    95,662        95,355  
Machinery and equipment    257,465        256,549  
Construction in progress    4,362        2,842  
     364,760        360,555  
Less accumulated depreciation    268,586        258,111  
Property, plant and equipment—net    96,174        102,444  
Total $   1,013,248     $   1,043,964  
LIABILITIES AND STOCKHOLDERS’ INVESTMENT      
Current liabilities:      
Notes payable $   4,072     $   4,928  
Accounts payable    60,144        62,245  
Wages and amounts withheld from employees    45,079        45,998  
Taxes, other than income taxes    7,109        7,403  
Accrued income taxes    2,706        6,136  
Other current liabilities    39,022        40,017  
Total current liabilities    158,132        166,727  
Long-term obligations, less current maturities    133,894        211,982  
Other liabilities    57,159        61,657  
Total liabilities    349,185        440,366  
Stockholders’ investment:      
Common stock:      
Class A nonvoting common stock—Issued 51,261,487 and 51,261,487 shares, respectively and outstanding 47,738,671 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    321,936        317,001  
Earnings retained in the business    492,411        453,371  
Treasury stock—3,522,816 and 4,340,513 shares, respectively of Class A nonvoting common stock, at cost    (87,493 )      (108,714 )
Accumulated other comprehensive loss    (63,339 )      (54,745 )
Other    —        (3,863 )
Total stockholders’ investment    664,063        603,598  
Total $   1,013,248     $   1,043,964  
       

 

BRADY CORPORATION AND SUBSIDIARIES        
CONSOLIDATED STATEMENTS OF CASH FLOWS        
(Unaudited; Dollars in thousands)        
  Nine months ended April 30,  
    2017       2016    
Operating activities:        
Net earnings $   70,403     $   54,974    
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization    20,789        24,896    
Stock-based compensation expense    7,445        6,247    
Deferred income taxes    (2,707 )      3,169    
Changes in operating assets and liabilities:        
Accounts receivable    (931 )      4,679    
Inventories    666        4,556    
Prepaid expenses and other assets    (1,987 )      (734 )  
Accounts payable and other liabilities    754        3,432    
Income taxes    (3,270 )      (2,669 )  
Net cash provided by operating activities    91,162        98,550    
         
Investing activities:        
Purchases of property, plant and equipment    (10,856 )      (7,468 )  
Other    38        1,987    
Net cash used in investing activities    (10,818 )      (5,481 )  
         
Financing activities:        
Payment of dividends    (31,362 )      (30,603 )  
Proceeds from exercise of stock options    18,674        663    
Purchase of treasury stock    —        (23,552 )  
(Repayments) proceeds from borrowing on credit facilities    (60,415 )      28,819    
Principal payments on debt    (16,371 )      (42,514 )  
Debt issuance costs    —        (803 )  
Income tax on equity-based compensation, and other    (512 )      (1,238 )  
Net cash used in financing activities    (89,986 )      (69,228 )  
         
Effect of exchange rate changes on cash    (2,509 )      3,263    
         
Net (decrease) increase in cash and cash equivalents    (12,151 )      27,104    
Cash and cash equivalents, beginning of period    141,228        114,492    
         
Cash and cash equivalents, end of period $   129,077     $   141,596    
         

 

BRADY CORPORATION AND SUBSIDIARIES                
SEGMENT INFORMATION                
(Unaudited; Dollars in thousands)                
                 
  Three Months Ended April 30,   Nine months Ended April 30,  
    2017       2016       2017       2016    
SALES TO EXTERNAL CUSTOMERS                
ID Solutions $   196,880     $   201,482     $   589,106     $   592,282    
Workplace Safety     79,047         85,334         234,998         246,237    
Total $   275,927     $   286,816     $   824,104     $   838,519    
                 
SALES INFORMATION                
ID Solutions                
Organic   (0.8 )%     (0.9 )%     0.6 %     (0.8 )%  
Currency   (1.5 )%     (1.1 )%     (1.1 )%     (3.7 )%  
Total   (2.3 )%     (2.0 )%     (0.5 )%     (4.5 )%  
Workplace Safety                
Organic   (4.6 )%     1.7 %     (2.5 )%     (0.4 )%  
Currency   (2.9 )%     (0.9 )%     (2.1 )%     (6.0 )%  
Total   (7.5 )%     0.8 %     (4.6 )%     (6.4 )%  
Total Company                
Organic    (1.9 )%     (0.1 )%     (0.3 )%     (0.7 )%  
Currency   (1.9 )%     (1.1 )%     (1.4 )%     (4.3 )%  
Total   (3.8 )%     (1.2 )%     (1.7 )%     (5.0 )%  
                 
SEGMENT PROFIT                
ID Solutions $   32,633     $   31,898     $   94,676     $   80,385    
Workplace Safety     5,120         6,012         17,615         21,690    
Total $   37,753     $   37,910     $   112,291     $   102,075    
SEGMENT PROFIT AS A PERCENT OF SALES                
ID Solutions   16.6 %     15.8 %     16.1 %     13.6 %  
Workplace Safety   6.5 %     7.0 %     7.5 %     8.8 %  
Total   13.7 %     13.2 %     13.6 %     12.2 %  
                 
                 
  Three Months Ended April 30,   Nine months Ended April 30,  
    2017       2016       2017       2016    
Total segment profit $   37,753     $   37,910     $   112,291     $   102,075    
Unallocated amounts:                
Administrative costs     (6,203 )       (7,126 )       (17,571 )       (17,600 )  
Investment and other income (expense)     453         721         560         (1,030 )  
Interest expense     (1,375 )       (1,838 )       (4,565 )       (6,119 )  
Earnings before income taxes $   30,628     $   29,667     $   90,715     $   77,326    
                 

 

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

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