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Brady Corporation Reports Fiscal 2018 Third Quarter Results and Increases the Bottom of its Fiscal 2018 EPS Guidance

  • Earnings before income taxes increased 20.7 percent, finishing at $37.0 million in the third quarter of fiscal 2018 compared to $30.6 million in the third quarter of fiscal 2017.  This marks our 11th consecutive quarter of profit growth.
  • Earnings per diluted Class A Nonvoting Common Share were $0.49 in the third quarter of fiscal 2018 compared to $0.43 in the same quarter of the prior year.
  • Total revenues increased 8.2 percent, which consisted of organic revenue growth of 3.2 percent and an increase of 5.0 percent from foreign currency translation.  This is our fourth consecutive quarter of organic revenue growth.
  • Earnings per diluted Class A Common Share guidance for the full year ending July 31, 2018 was tightened to a range of $1.95 to $2.00 from a previous range of $1.90 to $2.00, exclusive of tax charges primarily related to the enactment of the U.S. tax legislation.

MILWAUKEE, May 24, 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 third quarter ended April 30, 2018. 

Quarter Ended April 30, 2018 Financial Results:
Earnings before income taxes increased 20.7 percent, finishing at $37.0 million for the third quarter of fiscal 2018 compared to $30.6 million for the third quarter of fiscal 2017.

Net earnings for the quarter ended April 30, 2018, were $26.0 million compared to $22.6 million in the same quarter last year. 

Earnings per diluted Class A Nonvoting Common Share were $0.49 for the third quarter of fiscal 2018, compared to $0.43 in the same quarter last year. 

Sales for the quarter ended April 30, 2018 increased 8.2 percent to $298.4 million compared to $275.9 million in the same quarter last year.  By segment, sales increased 7.8 percent in Identification Solutions and 9.1 percent in Workplace Safety, which consisted of organic sales growth of 3.7 percent in Identification Solutions and 1.7 percent in Workplace Safety. 

Nine-Month Period Ended April 30, 2018 Financial Results:
Earnings before income taxes increased 17.7 percent, finishing at $106.8 million for the nine-month period ended April 30, 2018, compared to $90.7 million in the same period last year.

Net earnings for the nine-month period ended April 30, 2018 were $56.1 million compared to $70.4 million in the same period last year.  During the nine-month period ended April 30, 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 nine-month period ended April 30, 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 $1.07 for the nine-month period ended April 30, 2018, compared to $1.36 in the same period last year.  Income tax expense in the prior nine-month period ended April 30, 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 nine-month period ended April 30, 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 nine-month period ended April 30, 2018 increased 6.3 percent to $876.4 million compared to $824.1 million in the same period last year.  By segment, sales increased 6.7 percent in Identification Solutions and 5.6 percent in Workplace Safety, which consisted of organic sales growth of 3.7 percent in Identification Solutions and an organic sales decline of 0.1 percent in Workplace Safety. 

Commentary:
“Our continued focus on innovation and the development of high-quality products resulted in organic sales growth of 3.2 percent in the quarter, which was driven by both the Identification Solutions and Workplace Safety businesses.  This marks our fourth consecutive quarter of organic sales growth and our eleventh consecutive quarter of year-over-year pre-tax earnings growth.  We take a consistent and balanced approach to driving organic sales growth while executing sustainable efficiency gains throughout our global operations and SG&A structure,” said Brady’s President and Chief Executive Officer, J. Michael Nauman.  “We expect this positive organic sales trend to continue as we launch innovative new products in our Identification Solutions business, and as our Workplace Safety business returns to consistent quarterly organic sales growth and realizes benefits over the long-term due to its product innovation efforts.”

“Our cash generation remains strong,” said Brady’s Chief Financial Officer, Aaron Pearce.  “Even after significantly increasing our investments in research and development, we still increased our net cash provided by operating activities by 23.6% this quarter and significantly increased our investments in capital expenditures.  We also repaid $11.7 million in debt and finished in a net cash position of $72.7 million as of April 30, 2018.  Our strong balance sheet provides us with significant flexibility for investing in opportunities to drive long-term value for our shareholders.”

Fiscal 2018 Guidance:
The Company is tightening its full year fiscal 2018 earnings per diluted Class A Nonvoting Common Share guidance from its previous range of $1.90 to $2.00 to a range of $1.95 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 to $25 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.  The full benefit of the enactment of U.S. tax legislation will not be realized until next fiscal year.  This guidance is based upon foreign exchange rates as of April 30, 2018.

A webcast regarding Brady’s fiscal 2018 third quarter financial results will be available at www.bradycorp.com/investors 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 April 30,   Nine months ended April 30,
    2018       2017       2018       2017  
Net sales $   298,421     $   275,927     $   876,352     $   824,104  
Cost of products sold    147,339        136,018        435,513        409,679  
Gross margin    151,082        139,909        440,839        414,425  
Operating expenses:              
Research and development    11,678        9,950        33,512        28,577  
Selling, general and administrative    101,695        98,409        299,411        291,128  
Total operating expenses    113,373        108,359        332,923        319,705  
               
Operating income     37,709        31,550        107,916        94,720  
               
Other income (expense):              
Investment and other income    31        453        1,303        560  
Interest expense    (761 )      (1,375 )      (2,453 )      (4,565 )
               
Earnings before income taxes    36,979        30,628        106,766        90,715  
               
Income tax expense    10,979        8,075        50,657        20,312  
               
Net earnings $   26,000     $   22,553     $   56,109     $   70,403  
               
Net earnings per Class A Nonvoting Common Share:              
Basic  $   0.50     $   0.44     $   1.09     $   1.38  
Diluted  $   0.49     $   0.43     $   1.07     $   1.36  
Dividends $   0.21     $   0.21     $   0.62     $   0.62  
               
Net earnings per Class B Voting Common Share:              
Basic  $   0.50     $   0.44     $   1.07     $   1.37  
Diluted  $   0.49     $   0.43     $   1.05     $   1.34  
Dividends $   0.21     $   0.21     $   0.61     $   0.60  
               
Weighted average common shares outstanding (in thousands):              
Basic    51,747        51,227        51,628        50,972  
Diluted    52,729        52,201        52,610        51,882  

 

BRADY CORPORATION AND SUBSIDIARIES      
CONSOLIDATED BALANCE SHEETS      
(Unaudited; Dollars in thousands)      
       
  April 30, 2018   July 31, 2017
ASSETS      
Current assets:      
Cash and cash equivalents $   130,903     $   133,944  
Accounts receivable—net    161,319        149,638  
Inventories:      
Finished products    72,809        69,760  
Work-in-process    20,126        18,117  
Raw materials and supplies    22,598        19,147  
  Total inventories    115,533        107,024  
Prepaid expenses and other current assets    17,295        17,208  
Total current assets    425,050        407,814  
Other assets:      
Goodwill    435,426        437,697  
Other intangible assets    48,036        53,076  
Deferred income taxes    8,688        35,456  
Other    17,758        18,077  
Property, plant and equipment:      
Cost:      
Land    7,332        7,470  
Buildings and improvements    98,005        98,228  
Machinery and equipment    268,736        261,192  
Construction in progress    6,557        4,109  
     380,630        370,999  
Less accumulated depreciation    282,181        272,896  
Property, plant and equipment—net    98,449        98,103  
Total $   1,033,407     $   1,050,223  
LIABILITIES AND STOCKHOLDERS’ INVESTMENT      
Current liabilities:      
Notes payable $   —     $   3,228  
Accounts payable    68,627        66,817  
Wages and amounts withheld from employees    56,995        58,192  
Taxes, other than income taxes    7,772        7,970  
Accrued income taxes    5,564        7,373  
Other current liabilities    42,436        43,618  
Total current liabilities    181,394        187,198  
Long-term obligations    58,157        104,536  
Other liabilities    59,209        58,349  
Total liabilities    298,760        350,083  
Stockholders’ investment:      
Common stock:      
Class A nonvoting common stock—Issued 51,261,487 and 51,261,487 shares, respectively, and outstanding 48,205,763 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    327,401        322,608  
Earnings retained in the business    531,135        507,136  
Treasury stock—3,055,724 and 3,446,669 shares, respectively, of Class A nonvoting common stock, at cost    (76,291 )      (85,470 )
Accumulated other comprehensive loss    (48,146 )      (44,682 )
Total stockholders’ investment    734,647        700,140  
Total $   1,033,407     $   1,050,223  
       

 

BRADY CORPORATION AND SUBSIDIARIES      
CONSOLIDATED STATEMENTS OF CASH FLOWS      
(Unaudited; Dollars in thousands)      
  Nine months ended April 30,
    2018       2017  
Operating activities:      
Net earnings $   56,109     $   70,403  
Adjustments to reconcile net earnings to net cash provided by operating activities:      
Depreciation and amortization    19,047        20,789  
Non-cash portion of stock-based compensation expense    7,581        7,445  
Deferred income taxes    26,501        (2,707 )
Changes in operating assets and liabilities:      
Accounts receivable    (10,710 )      (931 )
Inventories    (7,790 )      666  
Prepaid expenses and other assets    480        (1,987 )
Accounts payable and other liabilities    (133 )      754  
Income taxes    (1,863 )      (3,270 )
Net cash provided by operating activities    89,222        91,162  
       
Investing activities:      
Purchases of property, plant and equipment    (14,755 )      (10,856 )
Other    (197 )      38  
Net cash used in investing activities    (14,952 )      (10,818 )
       
Financing activities:      
Payment of dividends    (32,110 )      (31,362 )
Proceeds from exercise of stock options    10,011        18,674  
Proceeds from borrowing on credit facilities    17,439        154,653  
Repayment of borrowing on credit facilities    (69,012 )      (215,068 )
Principal payments on debt    —        (16,371 )
Income tax on equity-based compensation, and other    (3,622 )      (512 )
Net cash used in financing activities    (77,294 )      (89,986 )
       
Effect of exchange rate changes on cash    (17 )      (2,509 )
       
Net decrease in cash and cash equivalents    (3,041 )      (12,151 )
Cash and cash equivalents, beginning of period    133,944        141,228  
       
Cash and cash equivalents, end of period $   130,903     $   129,077  
       

 

BRADY CORPORATION AND SUBSIDIARIES              
SEGMENT INFORMATION              
(Unaudited; Dollars in thousands)              
               
  Three Months Ended April 30,   Nine Months Ended April 30,
   2018     2017     2018     2017 
NET SALES              
ID Solutions $   212,154     $   196,880     $   628,291     $   589,106  
Workplace Safety     86,267         79,047         248,061         234,998  
Total $   298,421     $   275,927     $   876,352     $   824,104  
               
SALES INFORMATION              
ID Solutions              
Organic   3.7 %     (0.8 )%     3.7 %     0.6 %
Currency   4.1 %     (1.5 )%     3.0 %     (1.1 )%
Total   7.8 %     (2.3 )%     6.7 %     (0.5 )%
Workplace Safety              
Organic   1.7 %     (4.6 )%     (0.1 )%     (2.5 )%
Currency   7.4 %     (2.9 )%     5.7 %     (2.1 )%
Total   9.1 %     (7.5 )%     5.6 %     (4.6 )%
Total Company              
Organic    3.2 %     (1.9 )%     2.7 %     (0.3 )%
Currency   5.0 %     (1.9 )%     3.6 %     (1.4 )%
Total   8.2 %     (3.8 )%     6.3 %     (1.7 )%
               
SEGMENT PROFIT              
ID Solutions $   36,970     $   32,633     $   106,896     $   94,676  
Workplace Safety     7,537         5,120         21,037         17,615  
Total $   44,507     $   37,753     $   127,933     $   112,291  
SEGMENT PROFIT AS A PERCENT OF SALES              
ID Solutions   17.4 %     16.6 %     17.0 %     16.1 %
Workplace Safety   8.7 %     6.5 %     8.5 %     7.5 %
Total   14.9 %     13.7 %     14.6 %     13.6 %
               
               
  Three Months Ended April 30,   Nine Months Ended April 30,
   2018     2017     2018     2017 
Total segment profit $   44,507     $   37,753     $   127,933     $   112,291  
Unallocated amounts:              
Administrative costs     (6,798 )       (6,203 )       (20,017 )       (17,571 )
Investment and other income     31         453         1,303         560  
Interest expense     (761 )       (1,375 )       (2,453 )       (4,565 )
Earnings before income taxes $   36,979     $   30,628     $   106,766     $   90,715  
               


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

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