UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
 
 
 
FORM 8-K
 
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 22, 2018
 
 
 
BRADY CORPORATION
(Exact name of registrant as specified in its charter)
 
 
 
Commission File Number 1-14959
 
 
 
Wisconsin
 
39-0971239
(State of
Incorporation)
 
(IRS Employer
Identification No.)
6555 West Good Hope Road
Milwaukee, Wisconsin 53223
(Address of Principal Executive Offices and Zip Code)
(414) 358-6600
(Registrant’s Telephone Number)
 
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 or the Securities Exchange Act of 1934 (17 CFR 240.12b-2).
Emerging growth company  ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨






Item 2.02
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On February 22, 2018, Brady Corporation (the “Company”) issued a press release announcing its fiscal 2018 second quarter financial results. A copy of the press release is being furnished to the Securities and Exchange Commission as Exhibit 99.1 attached hereto and is incorporated herein by reference.

Item 7.01
REGULATION FD DISCLOSURE

On February 22, 2018, the Company hosted a conference call related to its fiscal 2018 second quarter financial results. A copy of the slides referenced in the conference call, which is also posted on the Corporation’s website, is being furnished to the Securities and Exchange Commission as Exhibit 99.2 attached hereto and is incorporated herein by reference.
Item 9.01
FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits

SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
BRADY CORPORATION
 
 
 
 
 
 
Date: February 22, 2018
 
/s/ AARON J. PEARCE
 
 
Aaron J. Pearce
 
 
Chief Financial Officer and Treasurer








EXHIBIT 99.1


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


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 (February 22, 2018)--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 accrued 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






This regulatory filing also includes additional resources:
f18q2conferencecallprese.pdf
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