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.
|
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|
|
|
|
|
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
nonvotingcommon 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
414-438-6887Media contact: Kate Venne 414-358-5176
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