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

Source:Brady Corp.