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Brady Corporation Reports Fiscal 2018 First Quarter Results

  • Earnings per diluted Class A Nonvoting Common Share increased 11.4 percent to $0.49 in the first quarter of fiscal 2018 compared to $0.44 in the same quarter of the prior year.
  • Total revenues increased 3.6 percent, which consisted of organic revenue growth of 1.7 percent and an increase of 1.9 percent due to foreign currency translation.
  • Net cash provided by operating activities was $34.7 million in the first quarter of fiscal 2018 and the Company was in a net cash position of $47.7 million at October 31, 2017 providing flexibility for future investments.

MILWAUKEE, Nov. 16, 2017 (GLOBE NEWSWIRE) -- Brady Corporation (NYSE:BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2018 first quarter ended October 31, 2017.

Quarter Ended October 31, 2017 Financial Results:
Net earnings for the quarter ended October 31, 2017, increased 14.6 percent to $25.8 million compared to $22.6 million in the same quarter last year.

Earnings per diluted Class A Nonvoting Common Share increased 11.4 percent to $0.49 for the quarter ended October 31, 2017, compared to $0.44 in the same quarter last year.

Sales for the quarter ended October 31, 2017, increased 3.6 percent to $290.2 million compared to $280.2 million in the same quarter last year.  Total organic sales increased 1.7 percent while foreign currency translation increased sales by 1.9 percent.  By segment, organic sales increased 2.9 percent in Identification Solutions and decreased 1.4 percent in Workplace Safety.

Commentary:
“Our focus on serving our customers extremely well, developing high-quality innovative products, driving efficiencies throughout our global operations, and strengthening our culture of innovation is working.  This marks our ninth consecutive quarter of year-over-year profit improvement,” said Brady’s President and Chief Executive Officer, J. Michael Nauman.  “Organic sales growth was 1.7 percent this quarter, and we expect to continue this positive trend as our increased investment in research and development strengthens our new product pipeline.  Brady is a company that was built on innovative products and solutions that our customers value to solve their unique safety and identification challenges.  We are rekindling this culture of innovation and are focused on providing solutions and great customer service to our target markets.  It’s exciting to see the impact as our culture of local ownership and accountability is allowing for increased innovative thought and actions throughout the Company, which is essential to execute our long-term strategy and to continue to deliver improved financial results for our shareholders.”

“Profitability improved compared to last year as a direct result of our focus on organic sales growth and on driving efficiencies throughout our operations and across our selling, general and administrative expense structure.  We remain focused on the business fundamentals that will deliver consistent long-term cash generation.  Cash provided by operating activities was $34.7 million in the first quarter, and we finished in a net cash position of $47.7 million compared to net cash of $26.2 million at the beginning of the quarter,” said Brady’s Chief Financial Officer, Aaron Pearce.  “Our balance sheet is solid and continues to provide significant flexibility for future investment and returning funds to our shareholders.”

Fiscal 2018 Guidance:
The Company’s earnings per diluted Class A Nonvoting Common Share guidance for the year ending July 31, 2018 remains unchanged at $1.85 to $1.95.  Included in this guidance is low-single digit organic sales growth, a full-year income tax rate of 27 percent to 29 percent, and depreciation and amortization expense of approximately $26 million.  The Company expects to achieve efficiency gains in its manufacturing facilities and in selling, general and administrative expenses while increasing investments in research and development 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.  This guidance is based upon foreign currency exchange rates as of October 31, 2017.

A webcast regarding Brady’s fiscal 2018 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, 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; decreased demand for our products; Brady’s ability to retain large customers; extensive regulations by U.S. and non-U.S. governmental and self-regulatory entities; Brady’s ability to execute facility consolidations and maintain acceptable operational service metrics; litigation, including product liability claims; risks associated with the loss of key employees; divestitures and contingent liabilities from divestitures; Brady’s ability to properly identify, integrate, and grow acquired companies; foreign currency fluctuations; changes in tax legislation and tax rates; 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, 2017.

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,  
  2017   2016  
Net sales $   290,151     $   280,176    
Cost of products sold    144,086        139,818    
Gross margin    146,065        140,358    
Operating expenses:        
Research and development    10,520        9,146    
Selling, general and administrative    100,134        98,004    
Total operating expenses    110,654        107,150    
         
Operating income     35,411        33,208    
         
Other income (expense):        
Investment and other income (expense)    216        (489 )  
Interest expense    (863 )      (1,732 )  
         
Earnings before income taxes    34,764        30,987    
         
Income tax expense    8,928        8,434    
         
Net earnings $   25,836     $   22,553    
         
Net Earnings per Class A Nonvoting Common Share:        
Basic  $   0.50     $   0.45    
Diluted  $   0.49     $   0.44    
Dividends $   0.21     $   0.21    
         
Net Earnings per Class B Voting Common Share:        
Basic  $   0.49     $   0.43    
Diluted  $   0.48     $   0.42    
Dividends $   0.19     $   0.19    
         
Weighted average common shares outstanding (in thousands):        
Basic    51,440        50,634    
Diluted    52,383        51,455    
         

 

       
BRADY CORPORATION AND SUBSIDIARIES      
CONSOLIDATED BALANCE SHEETS      
(Unaudited; Dollars in thousands)      
       
  October 31, 2017   July 31, 2017
ASSETS      
Current assets:      
Cash and cash equivalents $   142,237     $   133,944  
Accounts receivable—net    152,698        149,638  
Inventories:      
Finished products    69,458        69,760  
Work-in-process    19,052        18,117  
Raw materials and supplies    21,152        19,147  
  Total inventories    109,662        107,024  
Prepaid expenses and other current assets    19,045        17,208  
Total current assets    423,642        407,814  
Other assets:      
Goodwill    433,704        437,697  
Other intangible assets    51,200        53,076  
Deferred income taxes    36,281        35,456  
Other    17,072        18,077  
Property, plant and equipment:      
Cost:      
Land    7,344        7,470  
Buildings and improvements    97,457        98,228  
Machinery and equipment    262,820        261,192  
Construction in progress    4,123        4,109  
     371,744        370,999  
Less accumulated depreciation    276,030        272,896  
Property, plant and equipment—net    95,714        98,103  
Total $   1,057,613     $   1,050,223  
LIABILITIES AND STOCKHOLDERS’ INVESTMENT      
Current liabilities:      
Notes payable $   749     $   3,228  
Accounts payable    64,902        66,817  
Wages and amounts withheld from employees    64,863        58,192  
Taxes, other than income taxes    8,242        7,970  
Accrued income taxes    9,574        7,373  
Other current liabilities    45,455        43,618  
Total current liabilities    193,785        187,198  
Long-term obligations    93,810        104,536  
Other liabilities    57,347        58,349  
Total liabilities    344,942        350,083  
Stockholders’ investment:      
Common stock:      
Class A nonvoting common stock—Issued 51,261,487 shares and
outstanding 48,020,711 and 47,814,818 shares, respectively
   513        513  
Class B voting common stock—Issued and outstanding, 3,538,628
shares
   35        35  
Additional paid-in capital    322,657        322,608  
Earnings retained in the business    522,334        507,136  
Treasury stock—3,240,776 and 3,446,669 shares, respectively of Class A
nonvoting common stock, at cost
   (80,806 )      (85,470 )
Accumulated other comprehensive loss    (52,062 )      (44,682 )
Total stockholders’ investment    712,671        700,140  
Total $   1,057,613     $   1,050,223  
       

 

         
BRADY CORPORATION AND SUBSIDIARIES        
CONSOLIDATED STATEMENTS OF CASH FLOWS        
(Unaudited; Dollars in thousands)        
  Three months ended October 31,  
  2017   2016  
Operating activities:        
Net earnings $   25,836     $   22,553    
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization    6,564        7,234    
Non-cash portion of stock-based compensation expense    3,744        3,155    
Deferred income taxes    (1,168 )      2,027    
Changes in operating assets and liabilities:        
Accounts receivable    (4,807 )      (680 )  
Inventories    (3,571 )      1,197    
Prepaid expenses and other assets    (2,005 )      (1,170 )  
Accounts payable and accrued liabilities    7,799        2,546    
Income taxes    2,327        (2,869 )  
  Net cash provided by operating activities    34,719        33,993    
         
Investing activities:        
Purchases of property, plant and equipment    (3,802 )      (3,959 )  
Other    974        1,511    
  Net cash used in investing activities    (2,828 )      (2,448 )  
         
Financing activities:        
Payment of dividends    (10,639 )      (10,370 )  
Proceeds from exercise of stock options    3,249        8,813    
Proceeds from borrowing on credit facilities    10,901        27,565    
Repayments of borrowing on credit facilities    (22,894 )      (27,139 )  
Income tax on equity-based compensation, and other    (2,280 )      (1,232 )  
  Net cash used in financing activities    (21,663 )      (2,363 )  
         
Effect of exchange rate changes on cash    (1,935 )      (4,109 )  
         
Net increase in cash and cash equivalents    8,293        25,073    
Cash and cash equivalents, beginning of period    133,944        141,228    
         
Cash and cash equivalents, end of period $   142,237     $   166,301    
         

 

         
BRADY CORPORATION AND SUBSIDIARIES        
SEGMENT INFORMATION        
(Unaudited; Dollars in thousands)        
         
  Three months ended October 31,  
  2017   2016  
SALES TO EXTERNAL CUSTOMERS        
ID Solutions $   209,705     $   201,264    
Workplace Safety     80,446         78,912    
Total $   290,151     $   280,176    
         
SALES INFORMATION        
ID Solutions        
Organic   2.9 %     0.7 %  
Currency   1.3 %     (0.6 )%  
Total   4.2 %     0.1 %  
Workplace Safety        
Organic   (1.4 )%     (2.5 )%  
Currency   3.3 %     (1.3 )%  
Total   1.9 %     (3.8 )%  
Total Company        
Organic    1.7 %     (0.2 )%  
Currency   1.9 %     (0.8 )%  
Total   3.6 %     (1.0 )%  
         
SEGMENT PROFIT        
ID Solutions $   35,837     $   33,068    
Workplace Safety     6,445         6,450    
Total $   42,282     $   39,518    
SEGMENT PROFIT AS A PERCENT OF SALES        
ID Solutions   17.1 %     16.4 %  
Workplace Safety   8.0 %     8.2 %  
Total   14.6 %     14.1 %  
         
         
  Three months ended October 31,  
  2017   2016  
Total segment profit $   42,282     $   39,518    
Unallocated amounts:        
Administrative costs     (6,871 )       (6,310 )  
Investment and other income (expense)     216         (489 )  
Interest expense     (863 )       (1,732 )  
Earnings before income taxes $   34,764     $   30,987    
         

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

Brady Corporation

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