Brady Corporation (NYSE:BRC) (“Brady” or “Company”), a world leader
in identification solutions, today reported its financial results
for its fiscal 2017 second quarter ended January 31, 2017.
Quarter Ended January 31, 2017 Financial
Results:Net earnings for the quarter ended January 31,
2017, were $25.3 million compared to $15.3 million in the same
quarter last year.
Earnings per diluted Class A Nonvoting Common Share were $0.49
for the quarter ended January 31, 2017, compared to $0.30 in the
same quarter last year. During the quarter ended January 31,
2017, the Company’s effective tax rate was 13.1%, which was
impacted by certain one-time tax benefits from a cash
repatriation. The one-time tax items benefited earnings per
diluted Class A Nonvoting Common Share by approximately $0.09
during the quarter. Our historical average effective tax rate
is approximately 28%.
Sales for the quarter ended January 31, 2017, decreased 0.2
percent to $268.0 million compared to $268.6 million in the same
quarter last year. Total organic sales increased 1.3 percent
while the impact of foreign currency translation decreased sales by
1.5 percent. By segment, organic sales increased 1.9 percent
in Identification Solutions and decreased 0.2 percent in Workplace
Safety.
Six-Month Period Ended January 31, 2017 Financial
Results:Net earnings for the six-month period ended
January 31, 2017, were $47.9 million compared to $34.0 million in
the same quarter last year.
Earnings per diluted Class A Nonvoting Common Share were $0.93
for the six-month period ended January 31, 2017, compared to $0.67
in the same period in fiscal 2016.
During the six-month period ended January 31, 2017, the
Company’s effective tax rate was 20.4%, which was impacted by
certain one-time tax benefits from a cash repatriation. The
one-time tax items benefited earnings per diluted Class A Nonvoting
Common Share by approximately $0.09 during the six-month
period.
Sales for the six-month period ended January 31, 2017, decreased
0.6 percent to $548.2 million compared to $551.7 million in the
same quarter last year. Total organic sales increased 0.5
percent while foreign currency translation decreased sales by 1.1
percent. By segment, organic sales increased 1.3 percent in
Identification Solutions and decreased 1.3 percent in Workplace
Safety.
Commentary:“Our continued focus on developing
high-quality products, identifying efficiencies in our SG&A
structure, and driving a culture of local ownership and
accountability is working. This quarter marks our sixth
consecutive quarter of year-over-year earnings growth. Our
actions to improve organic sales are also working as we realized
organic sales growth of 1.3 percent this quarter and are at 0.5
percent organic sales growth year-to-date. However, we do
expect to see choppy organic growth patterns in the future as our
initiatives gain traction and due to fewer billing days in the
second half of fiscal 2017,” said Brady’s President and Chief
Executive Officer, J. Michael Nauman. “We believe our actions
are starting to result in long-term positive organic sales trends,
which we expect will translate into future profit
improvements. Looking forward, our priorities remain
unchanged, which are to grow our pipeline of innovative new
products, deliver efficiency gains, and serve our customers
extremely well. We are pleased that we have been able to
consistently improve our performance while simultaneously driving
our long-term strategy.”
“We continue to see profitability improvements as we focus on
driving efficiencies throughout our manufacturing operations while
actively reducing our selling, general and administrative expense
structure, all while investing in organic growth opportunities,”
said Brady’s Chief Financial Officer, Aaron Pearce. “Cash
generation for the quarter ended January 31, 2017, was below that
of last year due to the timing of certain payments. After
taking the impact of these timing items into account, it is clear
that our trend of solid cash generation continues as we finished
with net debt of $37.7 million as of January 31, 2017, compared to
net debt of $132.5 million as of January 31, 2016. As a
result of this cash generation, our balance sheet is solid and
provides significant flexibility for future investment and
returning funds to our shareholders.”
Fiscal 2017 Guidance:The Company is increasing
its earnings per diluted Class A Common Share guidance from a range
of $1.55 to $1.70 to a range of $1.75 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 January 31, 2017, a full-year income
tax rate in the mid-20 percent range, depreciation and amortization
expense of $30 million, and capital expenditures approximating $20
million.
A webcast regarding Brady’s fiscal 2017 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, 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.
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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, |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
Net sales |
|
$ |
268,001 |
|
|
$ |
268,630 |
|
|
$ |
548,177 |
|
|
$ |
551,703 |
|
Cost of products
sold |
|
|
133,843 |
|
|
|
135,738 |
|
|
|
273,661 |
|
|
|
279,462 |
|
Gross
margin |
|
|
134,158 |
|
|
|
132,892 |
|
|
|
274,516 |
|
|
|
272,241 |
|
Operating
expenses: |
|
|
|
|
|
|
|
|
Research
and development |
|
|
9,481 |
|
|
|
9,097 |
|
|
|
18,627 |
|
|
|
17,666 |
|
Selling,
general and administrative |
|
|
94,715 |
|
|
|
100,206 |
|
|
|
192,719 |
|
|
|
200,884 |
|
Total
operating expenses |
|
|
104,196 |
|
|
|
109,303 |
|
|
|
211,346 |
|
|
|
218,550 |
|
|
|
|
|
|
|
|
|
|
Operating
income |
|
|
29,962 |
|
|
|
23,589 |
|
|
|
63,170 |
|
|
|
53,691 |
|
|
|
|
|
|
|
|
|
|
Other income
(expense): |
|
|
|
|
|
|
|
|
Investment and other income (expense) |
|
|
596 |
|
|
|
(992 |
) |
|
|
107 |
|
|
|
(1,751 |
) |
Interest
expense |
|
|
(1,458 |
) |
|
|
(2,130 |
) |
|
|
(3,190 |
) |
|
|
(4,281 |
) |
|
|
|
|
|
|
|
|
|
Earnings before income
taxes |
|
|
29,100 |
|
|
|
20,467 |
|
|
|
60,087 |
|
|
|
47,659 |
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
3,803 |
|
|
|
5,177 |
|
|
|
12,237 |
|
|
|
13,666 |
|
|
|
|
|
|
|
|
|
|
Net
earnings |
|
$ |
25,297 |
|
|
$ |
15,290 |
|
|
$ |
47,850 |
|
|
$ |
33,993 |
|
|
|
|
|
|
|
|
|
|
Net earnings per
Class A Nonvoting Common Share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.50 |
|
|
$ |
0.30 |
|
|
$ |
0.94 |
|
|
$ |
0.67 |
|
Diluted |
|
$ |
0.49 |
|
|
$ |
0.30 |
|
|
$ |
0.93 |
|
|
$ |
0.67 |
|
Dividends |
|
$ |
0.21 |
|
|
$ |
0.20 |
|
|
$ |
0.41 |
|
|
$ |
0.41 |
|
|
|
|
|
|
|
|
|
|
Net earnings per Class
B Voting Common Share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.50 |
|
|
$ |
0.30 |
|
|
$ |
0.93 |
|
|
$ |
0.65 |
|
Diluted |
|
$ |
0.49 |
|
|
$ |
0.30 |
|
|
$ |
0.91 |
|
|
$ |
0.65 |
|
Dividends |
|
$ |
0.21 |
|
|
$ |
0.20 |
|
|
$ |
0.39 |
|
|
$ |
0.39 |
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding (in thousands): |
|
|
|
|
|
|
|
|
Basic |
|
|
51,054 |
|
|
|
50,527 |
|
|
|
50,844 |
|
|
|
50,778 |
|
Diluted |
|
|
51,954 |
|
|
|
50,647 |
|
|
|
51,721 |
|
|
|
50,868 |
|
BRADY
CORPORATION AND SUBSIDIARIES |
|
|
|
CONSOLIDATED
BALANCE SHEETS |
|
|
|
(Unaudited; Dollars in
thousands) |
|
|
|
|
|
|
|
|
January 31, 2017 |
|
July 31, 2016 |
ASSETS |
|
|
|
Current
assets: |
|
|
|
Cash and
cash equivalents |
$ |
125,208 |
|
|
$ |
141,228 |
|
Accounts
receivable—net |
|
140,018 |
|
|
|
147,333 |
|
Inventories: |
|
|
|
Finished
products |
|
60,642 |
|
|
|
64,313 |
|
Work-in-process |
|
17,029 |
|
|
|
16,678 |
|
Raw
materials and supplies |
|
19,737 |
|
|
|
18,436 |
|
Total
inventories |
|
97,408 |
|
|
|
99,427 |
|
Prepaid
expenses and other current assets |
|
19,051 |
|
|
|
19,436 |
|
Total current assets |
|
381,685 |
|
|
|
407,424 |
|
Other
assets: |
|
|
|
Goodwill |
|
424,857 |
|
|
|
429,871 |
|
Other
intangible assets |
|
55,980 |
|
|
|
59,806 |
|
Deferred
income taxes |
|
27,403 |
|
|
|
27,238 |
|
Other |
|
16,327 |
|
|
|
17,181 |
|
Property, plant
and equipment: |
|
|
|
Cost: |
|
|
|
Land |
|
7,272 |
|
|
|
5,809 |
|
Buildings
and improvements |
|
94,542 |
|
|
|
95,355 |
|
Machinery
and equipment |
|
254,688 |
|
|
|
256,549 |
|
Construction in progress |
|
3,168 |
|
|
|
2,842 |
|
|
|
359,670 |
|
|
|
360,555 |
|
Less
accumulated depreciation |
|
262,786 |
|
|
|
258,111 |
|
Property, plant and equipment—net |
|
96,884 |
|
|
|
102,444 |
|
Total |
$ |
1,003,136 |
|
|
$ |
1,043,964 |
|
LIABILITIES AND STOCKHOLDERS’ INVESTMENT |
|
|
|
Current
liabilities: |
|
|
|
Notes
payable |
$ |
5,691 |
|
|
$ |
4,928 |
|
Accounts
payable |
|
58,515 |
|
|
|
62,245 |
|
Wages and
amounts withheld from employees |
|
39,157 |
|
|
|
45,998 |
|
Taxes,
other than income taxes |
|
6,617 |
|
|
|
7,403 |
|
Accrued
income taxes |
|
2,011 |
|
|
|
6,136 |
|
Other
current liabilities |
|
38,210 |
|
|
|
40,017 |
|
Total current liabilities |
|
150,201 |
|
|
|
166,727 |
|
Long-term
obligations, less current maturities |
|
157,223 |
|
|
|
211,982 |
|
Other
liabilities |
|
60,820 |
|
|
|
61,657 |
|
Total liabilities |
|
368,244 |
|
|
|
440,366 |
|
Stockholders’
investment: |
|
|
|
Common
stock: |
|
|
|
Class A nonvoting common stock—Issued 51,261,487 and
51,261,487 shares, respectively and outstanding 47,594,684 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 |
|
317,587 |
|
|
|
317,001 |
|
Earnings
retained in the business |
|
480,368 |
|
|
|
453,371 |
|
Treasury
stock—3,666,803 and 4,340,513 shares, respectively of Class A
nonvoting common stock, at cost |
|
(90,998 |
) |
|
|
(108,714 |
) |
Accumulated other comprehensive loss |
|
(68,214 |
) |
|
|
(54,745 |
) |
Other |
|
(4,399 |
) |
|
|
(3,863 |
) |
Total stockholders’ investment |
|
634,892 |
|
|
|
603,598 |
|
Total |
$ |
1,003,136 |
|
|
$ |
1,043,964 |
|
BRADY
CORPORATION AND SUBSIDIARIES |
|
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS |
|
|
|
(Unaudited; Dollars in
thousands) |
|
|
|
|
Six months ended January 31, |
|
|
2017 |
|
|
|
2016 |
|
Operating
activities: |
|
|
|
Net earnings |
$ |
47,850 |
|
|
$ |
33,993 |
|
Adjustments to
reconcile net income to net cash provided by operating
activities: |
|
|
|
Depreciation and amortization |
|
14,102 |
|
|
|
17,502 |
|
Stock-based compensation expense |
|
5,394 |
|
|
|
4,569 |
|
Deferred
income taxes |
|
(4,547 |
) |
|
|
3,338 |
|
Changes
in operating assets and liabilities: |
|
|
|
Accounts
receivable |
|
3,407 |
|
|
|
3,204 |
|
Inventories |
|
224 |
|
|
|
3,403 |
|
Prepaid
expenses and other assets |
|
220 |
|
|
|
(3,811 |
) |
Accounts
payable and other liabilities |
|
(9,384 |
) |
|
|
(1,618 |
) |
Income
taxes |
|
(3,932 |
) |
|
|
(2,326 |
) |
Net cash
provided by operating activities |
|
53,334 |
|
|
|
58,254 |
|
|
|
|
|
Investing
activities: |
|
|
|
Purchases
of property, plant and equipment |
|
(7,235 |
) |
|
|
(3,928 |
) |
Other |
|
593 |
|
|
|
2,521 |
|
Net cash
used in investing activities |
|
(6,642 |
) |
|
|
(1,407 |
) |
|
|
|
|
Financing
activities: |
|
|
|
Payment
of dividends |
|
(20,852 |
) |
|
|
(20,425 |
) |
Proceeds
from exercise of stock options |
|
14,659 |
|
|
|
53 |
|
Purchase
of treasury stock |
|
— |
|
|
|
(23,397 |
) |
Repayment
of borrowing on credit facilities |
|
(50,469 |
) |
|
|
(437 |
) |
Debt
issuance costs |
|
— |
|
|
|
(803 |
) |
Income
tax on equity-based compensation, and other |
|
(640 |
) |
|
|
(1,299 |
) |
Net cash
used in financing activities |
|
(57,302 |
) |
|
|
(46,308 |
) |
|
|
|
|
Effect of exchange rate
changes on cash |
|
(5,410 |
) |
|
|
(4,833 |
) |
|
|
|
|
Net (decrease) increase
in cash and cash equivalents |
|
(16,020 |
) |
|
|
5,706 |
|
Cash and cash
equivalents, beginning of period |
|
141,228 |
|
|
|
114,492 |
|
|
|
|
|
Cash and cash
equivalents, end of period |
$ |
125,208 |
|
|
$ |
120,198 |
|
BRADY
CORPORATION AND SUBSIDIARIES |
|
|
|
|
|
|
|
SEGMENT
INFORMATION |
|
|
|
|
|
|
|
(Unaudited; Dollars in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended January 31, |
|
Six Months Ended January 31, |
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
SALES TO EXTERNAL CUSTOMERS |
|
|
|
|
|
|
|
ID
Solutions |
$ |
190,962 |
|
|
$ |
189,780 |
|
|
$ |
392,226 |
|
|
$ |
390,800 |
|
Workplace
Safety |
|
77,039 |
|
|
|
78,850 |
|
|
|
155,951 |
|
|
|
160,903 |
|
Total |
$ |
268,001 |
|
|
$ |
268,630 |
|
|
$ |
548,177 |
|
|
$ |
551,703 |
|
|
|
|
|
|
|
|
|
SALES INFORMATION |
|
|
|
|
|
|
|
ID Solutions |
|
|
|
|
|
|
|
Organic |
|
1.9 |
% |
|
|
0.9 |
% |
|
|
1.3 |
% |
|
|
(0.7 |
)% |
Currency |
|
(1.3 |
)% |
|
|
(4.6 |
)% |
|
|
(0.9 |
)% |
|
|
(5.0 |
)% |
Total |
|
0.6 |
% |
|
|
(3.7 |
)% |
|
|
0.4 |
% |
|
|
(5.7 |
)% |
Workplace Safety |
|
|
|
|
|
|
|
Organic |
|
(0.2 |
)% |
|
|
(0.6 |
)% |
|
|
(1.3 |
)% |
|
|
(1.4 |
)% |
Currency |
|
(2.1 |
)% |
|
|
(7.2 |
)% |
|
|
(1.8 |
)% |
|
|
(8.5 |
)% |
Total |
|
(2.3 |
)% |
|
|
(7.8 |
)% |
|
|
(3.1 |
)% |
|
|
(9.9 |
)% |
Total Company |
|
|
|
|
|
|
|
Organic |
|
1.3 |
% |
|
|
0.4 |
% |
|
|
0.5 |
% |
|
|
(0.9 |
)% |
Currency |
|
(1.5 |
)% |
|
|
(5.4 |
)% |
|
|
(1.1 |
)% |
|
|
(6.0 |
)% |
Total |
|
(0.2 |
)% |
|
|
(5.0 |
)% |
|
|
(0.6 |
)% |
|
|
(6.9 |
)% |
|
|
|
|
|
|
|
|
SEGMENT
PROFIT |
|
|
|
|
|
|
|
ID
Solutions |
$ |
28,961 |
|
|
$ |
23,056 |
|
|
$ |
62,035 |
|
|
$ |
48,487 |
|
Workplace
Safety |
|
6,059 |
|
|
|
6,296 |
|
|
|
12,504 |
|
|
|
15,678 |
|
Total |
$ |
35,020 |
|
|
$ |
29,352 |
|
|
$ |
74,539 |
|
|
$ |
64,165 |
|
SEGMENT PROFIT
AS A PERCENT OF SALES |
|
|
|
|
|
|
|
ID
Solutions |
|
15.2 |
% |
|
|
12.1 |
% |
|
|
15.8 |
% |
|
|
12.4 |
% |
Workplace
Safety |
|
7.9 |
% |
|
|
8.0 |
% |
|
|
8.0 |
% |
|
|
9.7 |
% |
Total |
|
13.1 |
% |
|
|
10.9 |
% |
|
|
13.6 |
% |
|
|
11.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended January 31, |
|
Six Months Ended January 31, |
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
Total
segment profit |
$ |
35,020 |
|
|
$ |
29,352 |
|
|
$ |
74,539 |
|
|
$ |
64,165 |
|
Unallocated
amounts: |
|
|
|
|
|
|
|
Administrative costs |
|
(5,058 |
) |
|
|
(5,763 |
) |
|
|
(11,369 |
) |
|
|
(10,474 |
) |
Investment and other income (expense) |
|
596 |
|
|
|
(992 |
) |
|
|
107 |
|
|
|
(1,751 |
) |
Interest
expense |
|
(1,458 |
) |
|
|
(2,130 |
) |
|
|
(3,190 |
) |
|
|
(4,281 |
) |
Earnings
before income taxes |
$ |
29,100 |
|
|
$ |
20,467 |
|
|
$ |
60,087 |
|
|
$ |
47,659 |
|
For More Information:
Investor contact: Ann Thornton 414-438-6887
Media contact: Kate Venne 414-358-5176
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