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Brady Corporation

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Brady Corporation Reports Fiscal 2017 Fourth Quarter Results and Announces its Fiscal 2018 EPS Guidance

  • Organic revenues increased 3.0 percent for the quarter ended July 31, 2017.
  • Earnings before income taxes increased 12.2 percent to $35.9 million in the fourth quarter of fiscal 2017 compared to $32.0 million in the same quarter of the prior year.
  • Earnings per diluted Class A Nonvoting Common Share were $0.48 in the fourth quarter of fiscal 2017 compared to $0.49 in the same quarter of the prior year.
  • Earnings per diluted Class A Common Share guidance for the full year ending July 31, 2018 announced at a range of $1.85 to $1.95. 

MILWAUKEE, Sept. 07, 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 fourth quarter ended July 31, 2017. 

Quarter Ended July 31, 2017 Financial Results:
Net earnings for the quarter ended July 31, 2017, were $25.2 million compared to $25.1 million in the same quarter last year.  Net earnings were significantly impacted by quarterly fluctuations in the income tax rate which was 29.7 percent for the quarter ended July 31, 2017, and 21.5 percent for the quarter ended July 31, 2016.  Earnings before income taxes increased 12.2 percent to $35.9 million for the quarter ended July 31, 2017 compared to $32.0 million for the quarter ended July 31, 2016.

Earnings per diluted Class A Nonvoting Common Share were $0.48 for the quarter ended July 31, 2017, compared to $0.49 in the same quarter last year. 

Sales for the quarter ended July 31, 2017, increased 2.5 percent to $289.2 million compared to $282.1 million in the same quarter last year.  Total organic sales increased 3.0 percent and the impact of foreign currency translation decreased sales by 0.5 percent.  By segment, organic sales increased 4.4 percent in Identification Solutions and decreased 0.6 percent in Workplace Safety.

Year Ended July 31, 2017 Financial Results:
Net earnings for the year ended July 31, 2017, were $95.6 million compared to $80.1 million last year.  Earnings before income taxes increased 15.8 percent to $126.6 million for the year ended July 31, 2017, compared to $109.3 million last year.

Earnings per diluted Class A Nonvoting Common Share were $1.84 for the year ended July 31, 2017, compared to $1.58 last year.

Sales for the year ended July 31, 2017, decreased 0.7 percent to $1.11 billion compared to $1.12 billion last year.  Total organic sales increased 0.5 percent and foreign currency translation decreased sales by 1.2 percent.  By segment, organic sales increased 1.6 percent in Identification Solutions and decreased 2.0 percent in Workplace Safety.

Commentary:
“We finished fiscal 2017 with our eighth consecutive quarter of year-over-year improvement in pre-tax earnings.  This is a direct result of our organic sales growth, our consistent focus on driving efficiencies throughout our SG&A structure, and our improved manufacturing processes,” said Brady’s President and Chief Executive Officer, J. Michael Nauman.  “Organic sales growth was 3.0 percent this quarter.  Our Identification Solutions business was the driver of our organic sales growth and is where we have been investing the most in the development of innovative new products.  This is beginning to generate improved organic sales trends.  Our priorities for fiscal 2018 remain unchanged, which are to grow our pipeline of innovative new products, accelerate organic sales growth, provide excellent customer service and deliver operational efficiencies throughout our business.  We continue to focus on the long-term by taking actions today that we believe will result in sustainable organic sales growth into the future.”

“The benefits from our organic sales growth were supplemented by our focus on operational efficiencies, our drive for sustainable efficiency gains in our general and administrative cost structure, and a strong focus on cash generation,” said Brady’s Chief Financial Officer, Aaron Pearce.  “During the year ended July 31, 2017, we increased our pre-tax earnings by 15.8 percent, increased net earnings by 19.4 percent, and generated $144.0 million of cash from operating activities, which represents 151 percent of net earnings.  Our cash generation was primarily used to return funds to our shareholders in the form of dividends and to strengthen our balance sheet.  We finished the year in a net cash position of $26.2 million compared to a net debt position of $75.7 million at the start of this fiscal year.  Our balance sheet provides significant flexibility for investments to drive long-term shareholder value.”

Fiscal 2018 Guidance:
The Company anticipates organic sales to increase in the low-single digits for the year ending July 31, 2018.  Brady expects earnings per diluted Class A Common Share to range from $1.85 to $1.95.  This guidance is based upon a full-year income tax rate of approximately 27 percent to 29 percent, which is higher than fiscal 2017, and depreciation and amortization expense of approximately $26 million.  The Company expects to continue to achieve efficiency gains in its manufacturing facilities and in selling, general and administrative expenses while increasing investments in research and development expenses by approximately 10 percent when compared to fiscal 2017.  Capital expenditures are anticipated to be approximately $30 million during the year ending July 31, 2018.  The Company’s fiscal 2018 guidance is based on foreign currency exchange rates as of July 31, 2017.

A webcast regarding Brady’s fiscal 2017 fourth 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, 2017, employed approximately 6,300 people in its worldwide businesses.  Brady’s fiscal 2017 sales were approximately $1.11 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 July 31,   Year ended July 31,  
    2017       2016         2017       2016    
Net sales   $   289,212     $   282,106     $   1,113,316     $   1,120,625    
Cost of products sold    145,345        141,017        555,024        561,852    
Gross margin    143,867        141,089        558,292        558,773    
Operating expenses:                
Research and development    11,047        9,268        39,624        35,799    
Selling, general and administrative    96,525        98,418        387,653        405,096    
Total operating expenses    107,572        107,686        427,277        440,895    
                 
Operating income     36,295        33,403        131,015        117,878    
                 
Other income (expense):                
Investment and other income (expense)     561        321        1,121        (709 )  
Interest expense    (939 )      (1,705 )      (5,504 )      (7,824 )  
                 
Earnings before income taxes    35,917        32,019        126,632        109,345    
                 
Income tax expense    10,675        6,883        30,987        29,235    
                 
Net earnings $   25,242     $   25,136     $   95,645     $   80,110    
                 
Net earnings per Class A Nonvoting Common Share:                
Basic  $   0.49     $   0.50     $   1.87     $   1.59    
Diluted  $   0.48     $   0.49     $   1.84     $   1.58    
Dividends $   0.21     $   0.20     $   0.82     $   0.81    
                 
Net earnings per Class B Voting Common Share:                
Basic  $   0.49     $   0.50     $   1.86     $   1.57    
Diluted  $   0.48     $   0.49     $   1.83     $   1.56    
Dividends $   0.21     $   0.20     $   0.80     $   0.79    
                 
Weighted average common shares outstanding (in thousands):                      
Basic    51,307        50,355        51,056        50,541    
Diluted    52,180        50,834        51,956        50,769    

 

BRADY CORPORATION AND SUBSIDIARIES      
CONSOLIDATED BALANCE SHEETS      
(Unaudited; Dollars in thousands)      
       
  July 31, 2017   July 31, 2016
ASSETS      
Current assets:      
Cash and cash equivalents  $   133,944      $   141,228  
Accounts receivable—net    149,638        147,333  
Inventories:      
Finished products    69,760        64,313  
Work-in-process    18,117        16,678  
Raw materials and supplies    19,147        18,436  
Total inventories    107,024        99,427  
Prepaid expenses and other current assets    17,208        19,436  
Total current assets    407,814        407,424  
Other assets:      
Goodwill    437,697        429,871  
Other intangible assets    53,076        59,806  
Deferred income taxes    35,456        27,238  
Other    18,077        17,181  
Property, plant and equipment:      
Cost:      
Land    7,470        5,809  
Buildings and improvements    98,228        95,355  
Machinery and equipment    261,192        256,549  
Construction in progress    4,109        2,842  
     370,999        360,555  
Less accumulated depreciation    272,896        258,111  
Property, plant and equipment—net    98,103        102,444  
Total $   1,050,223     $   1,043,964  
LIABILITIES AND STOCKHOLDERS’ INVESTMENT      
Current liabilities:      
Notes payable $   3,228     $   4,928  
Accounts payable    66,817        62,245  
Wages and amounts withheld from employees    58,192        45,998  
Taxes, other than income taxes    7,970        7,403  
Accrued income taxes    7,373        6,136  
Other current liabilities    43,618        40,017  
Total current liabilities    187,198        166,727  
Long-term obligations    104,536        211,982  
Other liabilities    58,349        61,657  
Total liabilities    350,083        440,366  
Stockholders’ investment:      
Common stock:      
Class A nonvoting common stock—Issued 51,261,487 shares and outstanding 47,814,818 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    322,608        317,001  
Earnings retained in the business    507,136        453,371  
Treasury stock—3,446,669 and 4,340,513 shares, respectively of Class A nonvoting common stock, at cost    (85,470 )      (108,714 )
Accumulated other comprehensive loss    (44,682 )      (54,745 )
Other    —        (3,863 )
Total stockholders’ investment    700,140        603,598  
Total $   1,050,223     $   1,043,964  

 

BRADY CORPORATION AND SUBSIDIARIES        
CONSOLIDATED STATEMENTS OF CASH FLOWS        
(Unaudited; Dollars in thousands)        
         
  Year ended July 31,  
    2017       2016    
Operating activities:        
Net earnings  $   95,645      $   80,110    
Adjustments to reconcile net earnings to net cash provided by operating activities:                        
Depreciation and amortization    27,303        32,432    
Non-cash portion of stock-based compensation expense    9,495        8,154    
Deferred income taxes    (8,618 )      2,085    
Changes in operating assets and liabilities:        
Accounts receivable    766        8,159    
Inventories    (5,687 )      4,833    
Prepaid expenses and other assets    1,812        475    
Accounts payable and accrued liabilities    22,255        3,928    
Income taxes    1,061        (1,200 )  
Net cash provided by operating activities    144,032        138,976    
         
Investing activities:        
Purchases of property, plant and equipment    (15,167 )      (17,140 )  
Other    (86 )      1,724    
Net cash used in investing activities    (15,253 )      (15,416 )  
         
Financing activities:        
Payment of dividends    (41,880 )      (40,808 )  
Proceeds from exercise of stock options    19,728        5,246    
Purchases of treasury stock    —        (23,552 )  
Proceeds from borrowing on credit facilities    180,320        96,276    
Repayment of borrowing on credit facilities    (244,268 )      (91,759 )  
Principal payments on debt    (49,302 )      (42,514 )  
Debt issuance costs    —        (803 )  
Income tax on equity-based compensation, and other    (839 )      (1,662 )  
Net cash used in financing activities    (136,241 )      (99,576 )  
         
Effect of exchange rate changes on cash    178        2,752    
         
Net (decrease) increase in cash and cash equivalents    (7,284 )      26,736    
Cash and cash equivalents, beginning of period    141,228        114,492    
         
Cash and cash equivalents, end of period $   133,944     $   141,228    
         
Supplemental disclosures:        
Cash paid during the period for:        
Interest $   5,766     $   8,528    
Income taxes    31,885        28,497    

 

BRADY CORPORATION AND SUBSIDIARIES                
SEGMENT INFORMATION                
(Unaudited; Dollars in Thousands)                
                 
  Three Months Ended July 31,   Year Ended July 31,  
    2017       2016       2017       2016    
SALES                
ID Solutions   $   211,286      $   203,229      $   800,392      $   795,511    
Workplace Safety     77,926         78,877         312,924         325,114    
Total $   289,212     $   282,106     $   1,113,316     $   1,120,625    
                 
SALES INFORMATION                
ID Solutions                
Organic   4.4 %     (0.6 )%     1.6 %     (0.7 )%  
Currency   (0.4 )%     (1.2 )%     (1.0 )%     (3.1 )%  
Total   4.0 %     (1.8 )%     0.6 %     (3.8 )%  
Workplace Safety                
Organic   (0.6 )%     (1.8 )%     (2.0 )%     (0.7 )%  
Currency   (0.6 )%     (1.8 )%     (1.7 )%     (5.0 )%  
Total   (1.2 )%     (3.6 )%     (3.7 )%     (5.7 )%  
Total Company                
Organic   3.0 %     (0.9 )%     0.5 %     (0.7 )%  
Currency   (0.5 )%     (1.4 )%     (1.2 )%     (3.7 )%  
Total   2.5 %     (2.3 )%     (0.7 )%     (4.4 )%  
                 
SEGMENT PROFIT                
ID Solutions $   35,896     $   31,891     $   130,572     $   112,276    
Workplace Safety     7,939         9,102         25,554         30,792    
Total $   43,835     $   40,993     $   156,126     $   143,068    
SEGMENT PROFIT AS A PERCENT OF SALES                                                    
ID Solutions   17.0 %     15.7 %     16.3 %     14.1 %  
Workplace Safety   10.2 %     11.5 %     8.2 %     9.5 %  
Total   15.2 %     14.5 %     14.0 %     12.8 %  
                 
                 
  Three Months Ended July 31,   Year Ended July 31,  
    2017       2016       2017       2016    
Total segment profit $   43,835     $   40,993     $   156,126     $   143,068    
Unallocated amounts:                
Administrative costs     (7,540 )       (7,590 )       (25,111 )       (25,190 )  
Investment and other income (expense)     561         321         1,121         (709 )  
Interest expense     (939 )       (1,705 )       (5,504 )       (7,824 )  
Earnings before income taxes $   35,917     $   32,019     $   126,632     $   109,345     
For More Information:
Investor contact:  Ann Thornton 414-438-6887
Media contact:  Kate Venne 414-358-5176

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