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Brady Corporation Reports Fiscal 2018 Second Quarter Results and Increases its Fiscal 2018 EPS Guidance

  • Earnings before income taxes increased 20.4 percent, finishing at $35.0 million in the second quarter of fiscal 2018 compared to $29.1 million in the second quarter of fiscal 2017.  This marks the 10th consecutive quarter of growth.
  • Earnings per diluted Class A Nonvoting Common Share were $0.08 in the second quarter of fiscal 2018 compared to $0.49 in the same quarter of the prior year.  Results were reduced by approximately $0.40 per diluted Class A Nonvoting Common Share due to tax charges primarily related to U.S. tax legislation enacted during the quarter.
  • Total revenues increased 7.4 percent, which consisted of organic revenue growth of 3.2 percent and an increase of 4.2 percent due to foreign currency translation.
  • Earnings per diluted Class A Common Share guidance for the full year ending July 31, 2018 was increased to a range of $1.90 to $2.00, exclusive of tax charges primarily related to the enactment of the U.S. tax legislation.

MILWAUKEE, Feb. 22, 2018 (GLOBE NEWSWIRE) -- Brady Corporation (NYSE:BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2018 second quarter ended January 31, 2018.

Quarter Ended January 31, 2018 Financial Results:
Earnings before income taxes increased 20.4 percent, finishing at $35.0 million for the second quarter of fiscal 2018 compared to $29.1 million for the second quarter of fiscal 2017.

Net earnings for the quarter ended January 31, 2018, were $4.3 million compared to $25.3 million in the same quarter last year.  During the quarter ended January 31, 2018, net earnings were reduced by $21.1 million due to income tax charges primarily related to the passage of the U.S. Tax Cuts and Jobs Act of 2017.  The prior year quarter ended January 31, 2017 was impacted by a cash repatriation which resulted in a lower than normal income tax rate. 

Earnings per diluted Class A Nonvoting Common Share were $0.08 for the quarter ended January 31, 2018, compared to $0.49 in the same quarter last year.  Income tax expense in the prior year quarter ended January 31, 2017 was impacted by a cash repatriation which increased earnings per diluted Class A Nonvoting Common Share by approximately $0.09, whereas the impact on income tax expense for the quarter ended January 31, 2018 from tax charges primarily related to the enactment of the U.S. tax legislation was a reduction in earnings per diluted Class A Nonvoting Common Share of approximately $0.40.

Sales for the quarter ended January 31, 2018 increased 7.4 percent to $287.8 million compared to $268.0 million in the same quarter last year.  By segment, sales increased 8.1 percent in Identification Solutions and 5.6 percent in Workplace Safety, which consisted of organic sales growth of 4.7 percent in Identification Solutions and an organic sales decline of 0.5 percent in Workplace Safety. 

Six-Month Period Ended January 31, 2018 Financial Results:
Earnings before income taxes increased 16.1 percent, finishing at $69.8 million for the six-month period ended January 31, 2018, compared to $60.1 million for the six-month period ended January 31, 2017.

Net earnings for the six-month period ended January 31, 2018 were $30.1 million compared to $47.9 million for the six-month period ended January 31, 2017.  During the six-month period ended January 31, 2018, net earnings were reduced by $21.1 million due to tax charges primarily related to the passage of the U.S. Tax Cuts and Jobs Act of 2017.  The prior year six-month period ended January 31, 2017 was impacted by a cash repatriation which resulted in a lower than normal income tax rate.

Earnings per diluted Class A Nonvoting Common Share were $0.57 for the six-month period ended January 31, 2018, compared to $0.93 in the same six-month period last year.  Income tax expense in the prior year six-month period ended January 31, 2017 was impacted by a cash repatriation which increased earnings per diluted Class A Nonvoting Common Share by approximately $0.09, whereas the impact on income tax expense for the six-month period ended January 31, 2018 from tax charges primarily related to the enactment of U.S. tax legislation was a reduction of approximately $0.40 of earnings per diluted Class A Nonvoting Common Share. 

Sales for the six-month period ended January 31, 2018 increased 5.4 percent to $577.9 million compared to $548.2 million in the same six-month period last year.  By segment, sales increased 6.1 percent in Identification Solutions and 3.7 percent in Workplace Safety, which consisted of organic sales growth of 3.8 percent in Identification Solutions and an organic sales decline of 1.0 percent in Workplace Safety. 

Commentary:
“Our investment in the development of innovative, high-quality products is paying off as we generated more than three percent organic sales growth this quarter, which was driven by our Identification Solutions business.  This marks our tenth consecutive quarter of year-over-year pre-tax earnings improvement, which was a direct result of our focus on driving organic growth while achieving sustainable efficiency gains throughout our SG&A structure,” said Brady’s President and Chief Executive Officer, J. Michael Nauman.  “We expect to continue this positive organic sales trend as we gain momentum in our research and development processes and through the execution of our strategy in our Workplace Safety business.  Our focus is consistent and remains on the long-term by taking actions today that we believe will result in organic sales growth and profit improvements into the future.”

“Organic sales growth and our continued focus on efficiency opportunities throughout SG&A were the drivers of our profit improvement this quarter,” said Brady’s Chief Financial Officer, Aaron Pearce.  “We used our cash generation to return funds to our shareholders and to repay debt.  We repaid $27.9 million in debt during the quarter and finished in a net cash position of $44.1 million as of January 31, 2018.  Our balance sheet continues to provide significant flexibility for investments in growth opportunities to drive long-term value for our shareholders.”

Fiscal 2018 Guidance:
The Company is increasing its full year fiscal 2018 earnings per diluted Class A Nonvoting Common Share guidance from its previous range of $1.85 to $1.95 to a range of $1.90 to $2.00, exclusive of tax charges primarily related to the enactment of the U.S. Tax Cuts and Jobs Act of 2017.  Included in this guidance is low-single digit organic sales growth, depreciation and amortization expense of approximately $26 million, and capital expenditures of approximately $20 million during the year ending July 31, 2018.  The Company expects its full-year income tax rate, exclusive of charges primarily related to the enactment of the U.S. Tax Cuts and Jobs Act of 2017, to range from approximately 27 percent to 29 percent.  This guidance is based upon foreign exchange rates as of January 31, 2018.

A webcast regarding Brady’s fiscal 2018 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, 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; the impact of the Tax Reform Act and any other 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 January 31,   Six months ended January 31,  
  2018   2017   2018   2017  
Net sales $   287,780     $   268,001     $   577,931     $   548,177    
Cost of products sold    144,088        133,843        288,174        273,661    
Gross margin    143,692        134,158        289,757        274,516    
Operating expenses:                
Research and development    11,314        9,481        21,834        18,627    
Selling, general and administrative    97,582        94,715        197,716        192,719    
Total operating expenses    108,896        104,196        219,550        211,346    
                 
Operating income     34,796        29,962        70,207        63,170    
                 
Other income (expense):                
Investment and other income    1,056        596        1,272        107    
Interest expense    (829 )      (1,458 )      (1,692 )      (3,190 )  
                 
Earnings before income taxes    35,023        29,100        69,787        60,087    
                 
Income tax expense    30,750        3,803        39,678        12,237    
                 
Net earnings $   4,273     $   25,297     $   30,109     $   47,850    
                 
Net earnings per Class A Nonvoting Common Share:                
Basic  $   0.08     $   0.50     $   0.58     $   0.94    
Diluted  $   0.08     $   0.49     $   0.57     $   0.93    
Dividends $   0.21     $   0.21     $   0.42     $   0.41    
                 
Net earnings per Class B Voting Common Share:                
Basic  $   0.08     $   0.50     $   0.57     $   0.93    
Diluted  $   0.08     $   0.49     $   0.56     $   0.91    
Dividends $   0.21     $   0.21     $   0.40     $   0.39    
                 
Weighted average common shares outstanding (in thousands):                
Basic    51,698        51,054        51,569        50,844    
Diluted    52,719        51,954        52,551        51,721    
                 

 

       
BRADY CORPORATION AND SUBSIDIARIES      
CONSOLIDATED BALANCE SHEETS      
(Unaudited; Dollars in thousands)      
       
  January 31, 2018   July 31, 2017
ASSETS      
Current assets:      
Cash and cash equivalents $   115,327     $   133,944  
Accounts receivable—net    164,400        149,638  
Inventories:      
    Finished products    72,629        69,760  
    Work-in-process    19,472        18,117  
    Raw materials and supplies    21,344        19,147  
        Total inventories    113,445        107,024  
Prepaid expenses and other current assets    20,950        17,208  
Total current assets    414,122        407,814  
Other assets:      
Goodwill    443,873        437,697  
Other intangible assets    50,131        53,076  
Deferred income taxes    9,899        35,456  
Other    18,579        18,077  
Property, plant and equipment:      
Cost:      
    Land    7,535        7,470  
    Buildings and improvements    98,256        98,228  
    Machinery and equipment    265,640        261,192  
    Construction in progress    6,176        4,109  
     377,607        370,999  
Less accumulated depreciation    279,826        272,896  
    Property, plant and equipment—net    97,781        98,103  
Total $   1,034,385     $   1,050,223  
LIABILITIES AND STOCKHOLDERS’ INVESTMENT      
Current liabilities:      
Notes payable $   585     $   3,228  
Accounts payable    64,365        66,817  
Wages and amounts withheld from employees    49,679        58,192  
Taxes, other than income taxes    7,997        7,970  
Accrued income taxes    6,085        7,373  
Other current liabilities    42,961        43,618  
    Total current liabilities    171,672        187,198  
Long-term obligations    70,615        104,536  
Other liabilities    60,125        58,349  
    Total liabilities    302,412        350,083  
Stockholders’ investment:      
Common stock:      
    Class A nonvoting common stock—Issued 51,261,487 and 51,261,487 shares,
    respectively, and outstanding 48,238,412 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    325,733        322,608  
Earnings retained in the business    515,872        507,136  
Treasury stock—3,023,075 and 3,446,669 shares, respectively, of Class A nonvoting
common stock, at cost		    (75,090 )      (85,470 )
Accumulated other comprehensive loss    (35,090 )      (44,682 )
    Total stockholders’ investment    731,973        700,140  
Total $   1,034,385     $   1,050,223  
       

 

         
BRADY CORPORATION AND SUBSIDIARIES        
CONSOLIDATED STATEMENTS OF CASH FLOWS        
(Unaudited; Dollars in thousands)        
  Six months ended January 31,  
  2018   2017  
Operating activities:        
Net earnings $   30,109     $   47,850    
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization    12,840        14,102    
Non-cash portion of stock-based compensation expense    5,897        5,394    
Deferred income taxes    26,028        (4,547 )  
Changes in operating assets and liabilities:        
    Accounts receivable    (10,945 )      3,407    
    Inventories    (4,150 )      224    
    Prepaid expenses and other assets    (3,153 )      220    
    Accounts payable and other liabilities    (12,695 )      (9,384 )  
    Income taxes    (1,471 )      (3,932 )  
        Net cash provided by operating activities    42,460        53,334    
         
Investing activities:        
Purchases of property, plant and equipment    (8,469 )      (7,235 )  
Other    (729 )      593    
        Net cash used in investing activities    (9,198 )      (6,642 )  
         
Financing activities:        
Payment of dividends    (21,373 )      (20,852 )  
Proceeds from exercise of stock options    9,948        14,659    
Proceeds from borrowing on credit facilities    17,439        144,533    
Repayment of borrowing on credit facilities    (57,314 )      (195,002 )  
Income tax on equity-based compensation, and other    (2,342 )      (640 )  
        Net cash used in financing activities    (53,642 )      (57,302 )  
         
Effect of exchange rate changes on cash    1,763        (5,410 )  
         
Net decrease in cash and cash equivalents    (18,617 )      (16,020 )  
Cash and cash equivalents, beginning of period    133,944        141,228    
         
Cash and cash equivalents, end of period $   115,327     $   125,208    
         

 

                 
BRADY CORPORATION AND SUBSIDIARIES                
SEGMENT INFORMATION                
(Unaudited; Dollars in thousands)                
                 
  Three Months Ended January 31,   Six Months Ended January 31,  
  2018   2017   2018   2017  
SALES TO EXTERNAL CUSTOMERS                
ID Solutions $   206,432     $   190,962     $   416,137     $   392,226    
Workplace Safety     81,348         77,039         161,794         155,951    
Total $   287,780     $   268,001     $   577,931     $   548,177    
                 
SALES INFORMATION                
ID Solutions                
Organic   4.7 %     1.9 %     3.8 %     1.3 %  
Currency   3.4 %     (1.3 )%     2.3 %     (0.9 )%  
Total   8.1 %     0.6 %     6.1 %     0.4 %  
Workplace Safety                
Organic   (0.5 )%     (0.2 )%     (1.0 )%     (1.3 )%  
Currency   6.1 %     (2.1 )%     4.7 %     (1.8 )%  
Total   5.6 %     (2.3 )%     3.7 %     (3.1 )%  
Total Company                
Organic    3.2 %     1.3 %     2.4 %     0.5 %  
Currency   4.2 %     (1.5 )%     3.0 %     (1.1 )%  
Total   7.4 %     (0.2 )%     5.4 %     (0.6 )%  
                 
SEGMENT PROFIT                
ID Solutions $   34,088     $   28,961     $   69,925     $   62,035    
Workplace Safety     7,055         6,059         13,500         12,504    
Total $   41,143     $   35,020     $   83,425     $   74,539    
SEGMENT PROFIT AS A PERCENT OF SALES                
ID Solutions   16.5 %     15.2 %     16.8 %     15.8 %  
Workplace Safety   8.7 %     7.9 %     8.3 %     8.0 %  
Total   14.3 %     13.1 %     14.4 %     13.6 %  
                 
                 
  Three Months Ended January 31,   Six Months Ended January 31,  
  2018   2017   2018   2017  
Total segment profit $   41,143     $   35,020     $   83,425     $   74,539    
Unallocated amounts:                
Administrative costs     (6,347 )       (5,058 )       (13,218 )       (11,369 )  
Investment and other income     1,056         596         1,272         107    
Interest expense     (829 )       (1,458 )       (1,692 )       (3,190 )  
Earnings before income taxes $   35,023     $   29,100     $   69,787     $   60,087    
                 

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

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