BRC Brady Corp

• Earnings per diluted Class A Nonvoting Common Share were $0.49 in the fourth quarter of fiscal 2016 compared to GAAP and non-GAAP (loss) earnings per diluted Class A Nonvoting Common Share* of $(0.77) and $0.28, respectively, in the same quarter of the prior year.
• Organic revenues declined 0.9 percent for the quarter ended July 31, 2016.
• Net cash provided by operating activities was $139.0 million during the year ended July 31, 2016, compared to $93.3 million in the prior year.
• Earnings per diluted Class A Common Share guidance for the full year ending July 31, 2017 announced at a range of $1.55 - $1.70.

Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2016 fourth quarter and year ended July 31, 2016.

Quarter Ended July 31, 2016 Financial Results:

Net earnings for the quarter ended July 31, 2016, were $25.1 million compared to a loss of $(39.4) million for the same quarter last year. Non-GAAP net earnings* were $14.4 million for the quarter ended July 31, 2015.

Earnings per diluted Class A Nonvoting Common Share were $0.49 for the fourth quarter ended July 31, 2016, compared to a loss per diluted Class A Nonvoting Common Share of $(0.77) in the same quarter last year. Non-GAAP earnings per diluted Class A Nonvoting Common Share* were $0.28 for the quarter ended July 31, 2015.

During the quarter ended July 31, 2016, the Company benefited from a lower income tax rate primarily due to the settlement of certain tax audits. If the tax rate for the quarter ended July 31, 2016 would have been at the historical average of approximately 28%, it would have reduced earnings per diluted Class A Nonvoting Common Share by approximately $0.04 during the quarter ended July 31, 2016.

Sales for the quarter ended July 31, 2016, decreased 2.3 percent to $282.1 million compared to $288.6 million in the fourth quarter of fiscal 2015. Total organic sales decreased 0.9 percent and foreign currency translation decreased sales by 1.4 percent. By segment, organic sales decreased 0.2 percent in Identification Solutions and decreased 2.7 percent in Workplace Safety.

Year Ended July 31, 2016 Financial Results:

Net earnings for the year ended July 31, 2016, were $80.1 million compared to net earnings from continuing operations of $4.9 million last year. Non-GAAP net earnings from continuing operations* were $65.5 million for the year ended July 31, 2015.

Earnings per diluted Class A Nonvoting Common Share were $1.58 for the year ended July 31, 2016, compared to earnings from continuing operations per diluted Class A Nonvoting Common Share of $0.10 last year. Non-GAAP earnings from continuing operations per diluted Class A Nonvoting Common Share* were $1.27 for the year ended July 31, 2015.

Sales for the year ended July 31, 2016, decreased 4.4 percent to $1.12 billion compared to $1.17 billion last year. Total organic sales decreased 0.7 percent and the impact of foreign currency translation decreased sales by 3.7 percent. By segment, organic sales decreased 0.7 percent in Identification Solutions and decreased 0.8 percent in Workplace Safety.

Commentary:

“We finished fiscal 2016 with GAAP diluted EPS of $1.58, which is a 24 percent increase compared to non-GAAP diluted EPS of $1.27 in the prior year. Our consistent focus on producing high-quality products, providing excellent customer service, developing efficient and effective manufacturing processes, and pushing for efficiencies in our SG&A structure are the primary drivers of our improved financial results. Our gross profit margin, segment profit margins and net earnings have all improved on a year-over-year basis for the fourth consecutive quarter,” said Brady’s President and Chief Executive Officer, J. Michael Nauman. “As we look forward, our top priorities remain unchanged, which are to grow our pipeline of innovative new products, deliver operational efficiencies, and serve our customers exceptionally well. I am pleased with our ability to improve our financial performance while simultaneously investing in our capabilities to create innovative solutions for our customers. We have an improving pipeline of new products and we anticipate increasing our investments in new products in fiscal 2017. Our consistent focus on our long-term strategy has positioned Brady to compete effectively and deliver improved results to our shareholders.”

“Our fourth quarter revenues were approximately in line with our expectations coming into the quarter; finishing with an organic sales decline of 0.9 percent. Demand has been choppy and we lack a clear catalyst for improved near-term sales. Although organic sales declined, profitability was stronger than anticipated as our focus on driving operational efficiencies and actively reducing our general and administrative structure provided financial benefits this quarter. During the year ended July 31, 2016, cash provided by operating activities was $139.0 million, which was a 49 percent improvement compared to the year ended July 31, 2015. We finished with net debt of $75.7 million as of July 31, 2016 compared to net debt of $139.2 million as of July 31, 2015,” said Brady’s Chief Financial Officer, Aaron Pearce. “As a result of our strong cash generation, our balance sheet continues to provide significant flexibility for future investment or returning funds to our shareholders.”

Fiscal 2017 Guidance:

The Company anticipates organic sales to range from a low single-digit decline to slightly positive growth for the year ending July 31, 2017. Brady expects earnings per diluted Class A Common Share to range from $1.55 to $1.70. This guidance range is based on foreign currency exchange rates as of July 31, 2016, which are expected to reduce revenues for fiscal 2017 by approximately 1.5 percent. 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 a full-year income tax rate of approximately 27 percent to 29 percent, which is higher than fiscal 2016, capital expenditures approximating $25 million, and depreciation and amortization of $30 million.

A webcast regarding Brady’s fiscal 2016 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, 2016, employed approximately 6,400 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.

* See accompanying notes for Non-GAAP measures.

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: implementation of the Workplace Safety strategy; Brady’s ability to develop and successfully market technologically advanced new products; technology changes and potential security violations to the Company’s information technology systems; future competition; future financial performance of major markets Brady serves, which include, without limitation, telecommunications, hard disk drive, manufacturing, electrical, construction, laboratory, education, governmental, public utility, computer, healthcare and transportation; fluctuations in currency rates versus the U.S. dollar; risks associated with international operations; difficulties associated with exports; changes in the supply of, or price for, parts and components; increased price pressure from suppliers and customers; Brady’s ability to retain significant contracts and customers; risk associated with loss of key talent; risks associated with obtaining governmental approvals and maintaining regulatory compliance; risk associated with product liability claims; environmental, health and safety compliance costs and liabilities; potential write-offs of Brady’s substantial intangible assets; unforeseen tax consequences; risks associated with restructuring plans and maintaining acceptable operational service metrics; risks associated with divestitures; risks associated with identifying, completing, and integrating acquisitions; risks associated with our ownership structure; Brady’s ability to maintain compliance with its debt covenants; increase in our level of debt; and 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, 2015.

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, Twelve months ended July 31, 2016 2015 2016 2015 Net sales $ 282,106 $ 288,636 $ 1,120,625 $ 1,171,731 Cost of products sold   141,017     159,567     561,852     613,299   Gross margin 141,089 129,069 558,773 558,432 Operating expenses: Research and development 9,268 9,227 35,799 36,734 Selling, general and administrative 98,418 102,908 405,096 422,704 Restructuring charges — 2,830 — 16,821 Impairment charges   —     46,867     —     46,867   Total operating expenses 107,686 161,832 440,895 523,126   Operating income (loss) 33,403 (32,763 ) 117,878 35,306   Other income (expense): Investment and other income (expense) 321 (123 ) (709 ) 845 Interest expense   (1,705 )   (2,762 )   (7,824 )   (11,156 )   Earnings (loss) from continuing operations before income taxes 32,019 (35,648 ) 109,345 24,995   Income tax expense   6,883     3,746     29,235     20,093     Earnings (loss) from continuing operations $ 25,136 $ (39,394 ) $ 80,110 $ 4,902   Loss from discontinued operations, net of income taxes   —     —     —     (1,915 )   Net earnings (loss) $ 25,136   $ (39,394 ) $ 80,110   $ 2,987     Earnings (loss) from continuing operations per Class A Nonvoting Common Share: Basic $ 0.50 $ (0.77 ) $ 1.59 $ 0.10 Diluted $ 0.49 $ (0.77 ) $ 1.58 $ 0.10   Earnings (loss) from continuing operations per Class B Voting Common Share: Basic $ 0.50 $ (0.77 ) $ 1.57 $ 0.08 Diluted $ 0.49 $ (0.77 ) $ 1.56 $ 0.08   Loss from discontinued operations per Class A Nonvoting Common Share: Basic $ — $ — $ — $ (0.04 ) Diluted $ — $ — $ — $ (0.04 )   Loss from discontinued operations per Class B Voting Common Share: Basic $ — $ — $ — $ (0.04 ) Diluted $ — $ — $ — $ (0.04 )   Net earnings (loss) per Class A Nonvoting Common Share: Basic $ 0.50 $ (0.77 ) $ 1.59 $ 0.06 Diluted $ 0.49 $ (0.77 ) $ 1.58 $ 0.06 Dividends $ 0.20 $ 0.20 $ 0.81 $ 0.80   Net earnings (loss) per Class B Voting Common Share: Basic $ 0.50 $ (0.77 ) $ 1.57 $ 0.04 Diluted $ 0.49 $ (0.77 ) $ 1.56 $ 0.04 Dividends $ 0.20 $ 0.20 $ 0.79 $ 0.78   Weighted average common shares outstanding (in thousands): Basic 50,355 51,317 50,541 51,285 Diluted 50,834 51,317 50,769 51,357     BRADY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited; Dollars in thousands)   July 31, 2016 July 31, 2015

ASSETS

Current assets: Cash and cash equivalents $ 141,228 $ 114,492 Accounts receivable—net 147,333 157,386 Inventories: Finished products 64,313 66,700 Work-in-process 16,678 16,958 Raw materials and supplies   18,436     20,849   Total inventories 99,427 104,507 Prepaid expenses and other current assets   19,436     19,755   Total current assets 407,424 396,140 Other assets: Goodwill 429,871 433,199 Other intangible assets 59,806 68,888 Deferred income taxes 27,238 34,752 Other 17,181 18,704 Property, plant and equipment: Cost: Land 5,809 5,284 Buildings and improvements 95,355 94,423 Machinery and equipment 256,549 270,086 Construction in progress   2,842     2,164   360,555 371,957 Less accumulated depreciation   258,111     260,743   Property, plant and equipment—net   102,444     111,214   Total $ 1,043,964   $ 1,062,897  

LIABILITIES AND STOCKHOLDERS’ INVESTMENT

Current liabilities: Notes payable $ 4,928 $ 10,411 Accounts payable 62,245 73,020 Wages and amounts withheld from employees 45,998 30,282 Taxes, other than income taxes 7,403 7,250 Accrued income taxes 6,136 7,576 Other current liabilities 40,017 37,939 Current maturities on long-term debt   —     42,514   Total current liabilities 166,727 208,992 Long-term obligations, less current maturities 211,982 200,774 Other liabilities   61,657     65,443   Total liabilities 440,366 475,209 Stockholders’ investment: Common stock: Class A nonvoting common stock—Issued 51,261,487 and 51,261,487 shares, respectively and outstanding 46,920,974 and 47,781,184 shares, respectively 513 513 Class B voting common stock—Issued and outstanding, 3,538,628 shares 35 35 Additional paid-in capital 317,001 314,403 Earnings retained in the business 453,371 414,069 Treasury stock—4,340,513 and 3,480,303 shares, respectively of Class A nonvoting

common stock, at cost

(108,714 ) (93,234 ) Accumulated other comprehensive loss (54,745 ) (45,034 ) Other   (3,863 )   (3,064 ) Total stockholders’ investment   603,598     587,688   Total $ 1,043,964   $ 1,062,897       BRADY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited; Dollars in thousands)   Twelve months ended July 31, 2016 2015 Operating activities: Net earnings $ 80,110 $ 2,987 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 32,432 39,458 Non-cash portion of restructuring charges — 4,164 Non-cash portion of stock-based compensation expense 8,154 4,471 Impairment charges — 46,867 Loss on sale of business, net — 426 Deferred income taxes 2,085 (7,233 ) Changes in operating assets and liabilities (net of effects of business acquisitions/divestitures): Accounts receivable 8,159 1,317 Inventories 4,833 (763 ) Prepaid expenses and other assets 475 9,188 Accounts payable and accrued liabilities 3,928 (8,516 ) Income taxes   (1,200 )   982   Net cash provided by operating activities 138,976 93,348   Investing activities: Purchases of property, plant and equipment (17,140 ) (26,673 ) Sale of business, net of cash retained — 6,111 Other   1,724     6,197   Net cash used in by investing activities (15,416 ) (14,365 )   Financing activities: Payment of dividends (40,808 ) (40,976 ) Proceeds from issuance of common stock 5,246 1,644 Purchases of treasury stock (23,552 ) — Proceeds from borrowing on credit facilities 96,276 83,382 Repayment of borrowing on credit facilities (91,759 ) (32,314 ) Principal payments on debt (42,514 ) (42,514 ) Debt issuance costs (803 ) — Income tax on equity-based compensation, and other   (1,662 )   (1,374 ) Net cash used in financing activities (99,576 ) (32,152 )   Effect of exchange rate changes on cash 2,752 (14,173 )   Net increase in cash and cash equivalents 26,736 32,658 Cash and cash equivalents, beginning of period   114,492     81,834     Cash and cash equivalents, end of period $ 141,228   $ 114,492     Supplemental disclosures: Cash paid during the period for: Interest $ 8,528 $ 11,164 Income taxes 28,497 25,024   BRADY CORPORATION AND SUBSIDIARIES SEGMENT INFORMATION (Unaudited; Dollars in Thousands)         Three Months Ended July 31, Year Ended July 31, 2016 2015 2016 2015 SALES TO EXTERNAL CUSTOMERS ID Solutions $ 198,717 $ 201,536 $ 776,877 $ 806,484 Workplace Safety   83,389     87,100     343,748     365,247   Total $ 282,106   $ 288,636   $ 1,120,625   $ 1,171,731     SALES INFORMATION ID Solutions Organic (0.2 )% (0.3 )% (0.7 )% 1.7 % Currency   (1.2 )%   (5.7 )%   (3.0 )%   (4.0 )% Total   (1.4 )%   (6.0 )%   (3.7 )%   (2.3 )% Workplace Safety Organic (2.7 )% (3.2 )% (0.8 )% (0.4 )% Currency   (1.6 )%   (11.7 )%   (5.1 )%   (8.3 )% Total   (4.3 )%   (14.9 )%   (5.9 )%   (8.7 )% Total Company Organic (0.9 )% (1.2 )% (0.7 )% 1.0 % Currency   (1.4 )%   (7.7 )%   (3.7 )%   (5.4 )% Total   (2.3 )%   (8.9 )%   (4.4 )%   (4.4 )%   SEGMENT PROFIT ID Solutions $ 46,324 $ 29,040 $ 169,776 $ 149,840 Workplace Safety   16,029     15,895       59,847     56,502   Total $ 62,353   $ 44,935     $ 229,623   $ 206,342   SEGMENT PROFIT AS A PERCENT OF SALES ID Solutions 23.3 % 14.4 % 21.9 % 18.6 % Workplace Safety   19.2 %   18.2 %   17.4 %   15.5 % Total   22.1 %   15.6 %   20.5 %   17.6 %     Three Months Ended July 31, Year Ended July 31, 2016 2015 2016 2015 Total segment profit $ 62,353 $ 44,935 $ 229,623 $ 206,342 Unallocated amounts: Administrative costs (28,950 ) (28,001 ) (111,745 ) (107,348 ) Restructuring charges - (2,830 ) - (16,821 ) Impairment charges - (46,867 ) - (46,867 ) Investment and other income (expense) 321 (123 ) (709 ) 845 Interest expense   (1,705 )   (2,762 )   (7,824 )   (11,156 ) Earnings (loss) from continuing operations before income taxes $ 32,019   $ (35,648 ) $ 109,345   $ 24,995     GAAP to NON-GAAP MEASURES (Unaudited; Dollars in Thousands, Except Per Share Amounts)               In accordance with the U.S. Securities and Exchange Commission’s Regulation G, the following provides definitions of the non-GAAP measures used in the earnings release and the reconciliation to the most closely related GAAP measure.     Earnings from Continuing Operations Before Income Taxes Excluding Certain Items: Brady is presenting the Non-GAAP measure "Earnings from Continuing Operations Before Income Taxes Excluding Certain Items." This is not a calculation based upon GAAP. The amounts included in this Non-GAAP measure are derived from amounts included in the Consolidated Financial Statements and supporting footnote disclosures. We do not view these items to be part of our sustainable results. We believe this profit measure provides an important perspective of underlying business trends and results and provides a more comparable measure from year to year. The table below provides a reconciliation of (Loss) Earnings from Continuing Operations Before Income Taxes to Earnings from Continuing Operations Before Income Taxes Excluding Certain Items:     Three months ended July 31, Twelve months ended July 31, 2016 2015 2016 2015

Earnings (Loss) from Continuing Operations Before Income Taxes (GAAP measure)

$ 32,019 $ (35,648 ) $ 109,345 $ 24,995 Restructuring charges - 2,830 - 16,821 Impairment charges - 46,867 - 46,867 Other non-routine charges - 7,430 - 7,430 Postretirement benefit plan curtailment gain - - - (4,296 ) Earnings from Continuing Operations Before Income Taxes Excluding Certain         Items (non-GAAP measure) $ 32,019 $ 21,479   $ 109,345 $ 91,817       Income Taxes on Continuing Operations Excluding Certain Items: Brady is presenting the Non-GAAP measure "Income Taxes on Continuing Operations Excluding Certain Items." This is not a calculation based upon GAAP. The amounts included in this Non-GAAP measure are derived from amounts included in the Consolidated Financial Statements and supporting footnote disclosures. We do not view these items to be part of our sustainable results. We believe this measure provides an important perspective of underlying business trends and results and provides a more comparable measure from year to year. The table below provides a reconciliation of Income Taxes on Continuing Operations to Income Taxes on Continuing Operations Excluding Certain Items:     Three months ended July 31, Twelve months ended July 31, 2016 2015 2016 2015 Income Taxes on Continuing Operations (GAAP measure) $ 6,883 $ 3,746 $ 29,235 $ 20,093 Restructuring charges - 672 - 5,078 Impairment charges - - - - Other non-routine charges - 2,673 - 2,673 Postretirement benefit plan curtailment gain - - - (1,504 ) Income Taxes on Continuing Operations Excluding Certain Items (non-GAAP         measure) $ 6,883 $ 7,091   $ 29,235 $ 26,340       Net Earnings from Continuing Operations Excluding Certain Items: Brady is presenting the Non-GAAP measure "Net Earnings from Continuing Operations Excluding Certain Items." This is not a calculation based upon GAAP. The amounts included in this Non-GAAP measure are derived from amounts included in the Consolidated Financial Statements and supporting footnote disclosures. We do not view these items to be part of our sustainable results. We believe this measure provides an important perspective of underlying business trends and results and provides a more comparable measure from year to year. The table below provides a reconciliation of Net (Loss) Earnings from Continuing Operations to Net Earnings from Continuing Operations Excluding Certain Items:     Three months ended July 31, Twelve months ended July 31, 2016 2015 2016 2015

Net Earnings (Loss) from Continuing Operations (GAAP measure)

$ 25,136 $ (39,394 ) $ 80,110 $ 4,902 Restructuring charges - 2,158 - 11,743 Impairment charges - 46,867 - 46,867 Other non-routine charges - 4,757 - 4,757 Postretirement benefit plan curtailment gain - - - (2,792 ) Net Earnings from Continuing Operations Excluding Certain Items (non-         GAAP measure) $ 25,136 $ 14,388   $ 80,110 $ 65,477       Net Earnings from Continuing Operations Per Diluted Class A Nonvoting Common Share Excluding Certain Items: Brady is presenting the Non-GAAP measure "Net Earnings from Continuing Operations Per Diluted Class A Nonvoting Common Share Excluding Certain Items." This is not a calculation based upon GAAP. The amounts included in this Non-GAAP measure are derived from amounts included in the Consolidated Financial Statements. We do not view these items to be part of our sustainable results. We believe this measure provides an important perspective of underlying business trends and results and provides a more comparable measure from year to year. The table below provides a reconciliation of Net (Loss) Earnings from Continuing Operations Per Diluted Class A Nonvoting Common Share to Net Earnings from Continuing Operations Per Diluted Class A Nonvoting Common Share Excluding Certain Items:     Three months ended July 31, Twelve months ended July 31, 2016 2015 2016 2015

Net Earnings (Loss) from Continuing Operations Per Diluted Class A

$ 0.49 $ (0.77 ) $ 1.58 $ 0.10 Nonvoting Common Share (GAAP measure) Restructuring charges - 0.04 - 0.23 Impairment charges - 0.91 - 0.91 Other non-routine charges - 0.09 - 0.09 Postretirement benefit plan curtailment gain - - - (0.05 ) Net Earnings from Continuing Operations Per Diluted Class A Nonvoting         Common Share Excluding Certain Items (non-GAAP measure) $ 0.49 $ 0.28   $ 1.58 $ 1.27    

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Brady CorporationInvestor contact:Ann Thornton, 414-438-6887orMedia contact:Kate Venne, 414-358-5176