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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

Source:Brady Corp.