Brady Corporation (NYSE:BRC) (“Brady” or “Company”), a world leader
in identification solutions, today reported its financial results
for its fiscal 2017 third quarter ended April 30, 2017.
Quarter Ended April 30, 2017 Financial Results:
Net earnings for the quarter ended April 30, 2017, were $22.6
million compared to $21.0 million in the same quarter last
year.
Earnings per diluted Class A Nonvoting Common Share were $0.43
for the quarter ended April 30, 2017, compared to $0.42 in the same
quarter last year.
Sales for the quarter ended April 30, 2017, decreased 3.8
percent to $275.9 million compared to $286.8 million in the same
quarter last year. Total organic sales decreased 1.9 percent
and the impact of foreign currency translation decreased sales by
1.9 percent. By segment, organic sales decreased 0.8 percent
in Identification Solutions and decreased 4.6 percent in Workplace
Safety.
Nine-Month Period Ended April 30, 2017 Financial
Results:
Net earnings for the nine-month period ended April 30, 2017,
were $70.4 million compared to $55.0 million in the same period
last year.
Earnings per diluted Class A Nonvoting Common Share were $1.36
for the nine-month period ended April 30, 2017, compared to $1.08
in the same period last year.
Sales for the nine-month period ended April 30, 2017, decreased
1.7 percent to $824.1 million compared to $838.5 million in the
same period last year. Total organic sales decreased 0.3
percent and foreign currency translation decreased sales by 1.4
percent. By segment, organic sales increased 0.6 percent in
Identification Solutions and decreased 2.5 percent in Workplace
Safety.
Commentary:
“Our consistent focus on developing high-quality products,
providing excellent customer service, pushing for efficiencies
throughout our SG&A structure, and empowering the Brady team
with local ownership and accountability are the primary drivers of
our improved financial results. This quarter marks our
seventh consecutive quarter of year-over-year earnings growth,”
said Brady’s President and Chief Executive Officer, J. Michael
Nauman. “We believe that our focus on driving efficiencies
combined with our organic sales initiatives and our new product
pipeline is beginning to generate improved organic sales trends,
and will continue to drive future profit improvements. That
said, challenges in the distribution channel will impact our
Workplace Safety business while we are more optimistic about growth
in the fourth quarter in Identification Solutions. Looking
forward, our priorities remain unchanged, which are to grow our
pipeline of innovative new products, provide excellent customer
service and deliver operational efficiencies. We are pleased
with our ability to improve our financial performance while
maintaining our focus on our long-term strategy.”
“Third quarter revenues were approximately in line with our
expectations coming into the quarter, finishing with an organic
sales decline of 1.9 percent. Our third quarter was impacted
by fewer billing days compared to the same quarter in the prior
year. Organic sales were up 0.7% on a per day basis.
Our ability to drive operational efficiencies and actively reduce
our general and administrative structure provided financial
benefits this quarter,” said Brady’s Chief Financial Officer, Aaron
Pearce. “Cash generation for the quarter ended April 30, 2017
continued to be strong, as we finished with net cash provided by
operating activities of $37.8 million while reducing our net debt
by $28.8 million this quarter. Our strong balance sheet
provides significant flexibility for future investments in new
products and returning funds to our shareholders.”
Fiscal 2017 Guidance:
The Company is tightening its earnings per diluted Class A
Common Share guidance from a range of $1.75 to $1.85 to a range of
$1.80 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 April 30, 2017, a full-year income tax rate in
the mid-20 percent range, depreciation and amortization expense of
$28 million, and capital expenditures approximating $17
million.
A webcast regarding Brady’s fiscal 2017 third 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.
BRADY
CORPORATION AND SUBSIDIARIES |
|
|
|
|
|
|
|
|
CONSOLIDATED
STATEMENTS OF EARNINGS |
|
|
|
|
|
|
|
|
(Unaudited; Dollars in
thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended April 30, |
|
Nine months ended April 30, |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
Net sales |
$ |
275,927 |
|
|
$ |
286,816 |
|
|
$ |
824,104 |
|
|
$ |
838,519 |
|
|
Cost of products
sold |
|
136,018 |
|
|
|
141,373 |
|
|
|
409,679 |
|
|
|
420,835 |
|
|
Gross
margin |
|
139,909 |
|
|
|
145,443 |
|
|
|
414,425 |
|
|
|
417,684 |
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
Research
and development |
|
9,950 |
|
|
|
8,865 |
|
|
|
28,577 |
|
|
|
26,531 |
|
|
Selling,
general and administrative |
|
98,409 |
|
|
|
105,794 |
|
|
|
291,128 |
|
|
|
306,678 |
|
|
Total
operating expenses |
|
108,359 |
|
|
|
114,659 |
|
|
|
319,705 |
|
|
|
333,209 |
|
|
|
|
|
|
|
|
|
|
|
Operating
income |
|
31,550 |
|
|
|
30,784 |
|
|
|
94,720 |
|
|
|
84,475 |
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense): |
|
|
|
|
|
|
|
|
Investment and other income (expense) |
|
453 |
|
|
|
721 |
|
|
|
560 |
|
|
|
(1,030 |
) |
|
Interest
expense |
|
(1,375 |
) |
|
|
(1,838 |
) |
|
|
(4,565 |
) |
|
|
(6,119 |
) |
|
|
|
|
|
|
|
|
|
|
Earnings before income
taxes |
|
30,628 |
|
|
|
29,667 |
|
|
|
90,715 |
|
|
|
77,326 |
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
8,075 |
|
|
|
8,686 |
|
|
|
20,312 |
|
|
|
22,352 |
|
|
|
|
|
|
|
|
|
|
|
Net
earnings |
$ |
22,553 |
|
|
$ |
20,981 |
|
|
$ |
70,403 |
|
|
$ |
54,974 |
|
|
|
|
|
|
|
|
|
|
|
Net earnings per
Class A Nonvoting Common Share: |
|
|
|
|
|
|
|
|
Basic |
$ |
0.44 |
|
|
$ |
0.42 |
|
|
$ |
1.38 |
|
|
$ |
1.09 |
|
|
Diluted |
$ |
0.43 |
|
|
$ |
0.42 |
|
|
$ |
1.36 |
|
|
$ |
1.08 |
|
|
Dividends |
$ |
0.21 |
|
|
$ |
0.20 |
|
|
$ |
0.62 |
|
|
$ |
0.61 |
|
|
|
|
|
|
|
|
|
|
|
Net earnings per Class
B Voting Common Share: |
|
|
|
|
|
|
|
|
Basic |
$ |
0.44 |
|
|
$ |
0.42 |
|
|
$ |
1.37 |
|
|
$ |
1.07 |
|
|
Diluted |
$ |
0.43 |
|
|
$ |
0.42 |
|
|
$ |
1.34 |
|
|
$ |
1.07 |
|
|
Dividends |
$ |
0.21 |
|
|
$ |
0.20 |
|
|
$ |
0.60 |
|
|
$ |
0.59 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding (in thousands): |
|
|
|
|
|
|
|
|
Basic |
|
51,227 |
|
|
|
50,251 |
|
|
|
50,972 |
|
|
|
50,602 |
|
|
Diluted |
|
52,201 |
|
|
|
50,505 |
|
|
|
51,882 |
|
|
|
50,747 |
|
|
|
|
|
|
|
|
|
|
|
BRADY CORPORATION AND
SUBSIDIARIES |
|
|
|
CONSOLIDATED BALANCE
SHEETS |
|
|
|
(Unaudited; Dollars in
thousands) |
|
|
|
|
|
|
|
|
April 30, 2017 |
|
July 31, 2016 |
ASSETS |
|
|
|
Current
assets: |
|
|
|
Cash and
cash equivalents |
$ |
129,077 |
|
|
$ |
141,228 |
|
Accounts
receivable—net |
|
145,755 |
|
|
|
147,333 |
|
Inventories: |
|
|
|
Finished
products |
|
61,025 |
|
|
|
64,313 |
|
Work-in-process |
|
17,326 |
|
|
|
16,678 |
|
Raw
materials and supplies |
|
19,126 |
|
|
|
18,436 |
|
Total
inventories |
|
97,477 |
|
|
|
99,427 |
|
Prepaid
expenses and other current assets |
|
20,343 |
|
|
|
19,436 |
|
Total current assets |
|
392,652 |
|
|
|
407,424 |
|
Other
assets: |
|
|
|
Goodwill |
|
425,935 |
|
|
|
429,871 |
|
Other
intangible assets |
|
54,107 |
|
|
|
59,806 |
|
Deferred
income taxes |
|
26,228 |
|
|
|
27,238 |
|
Other |
|
18,152 |
|
|
|
17,181 |
|
Property, plant
and equipment: |
|
|
|
Cost: |
|
|
|
Land |
|
7,271 |
|
|
|
5,809 |
|
Buildings
and improvements |
|
95,662 |
|
|
|
95,355 |
|
Machinery
and equipment |
|
257,465 |
|
|
|
256,549 |
|
Construction in progress |
|
4,362 |
|
|
|
2,842 |
|
|
|
364,760 |
|
|
|
360,555 |
|
Less
accumulated depreciation |
|
268,586 |
|
|
|
258,111 |
|
Property, plant and equipment—net |
|
96,174 |
|
|
|
102,444 |
|
Total |
$ |
1,013,248 |
|
|
$ |
1,043,964 |
|
LIABILITIES AND STOCKHOLDERS’ INVESTMENT |
|
|
|
Current
liabilities: |
|
|
|
Notes
payable |
$ |
4,072 |
|
|
$ |
4,928 |
|
Accounts
payable |
|
60,144 |
|
|
|
62,245 |
|
Wages and
amounts withheld from employees |
|
45,079 |
|
|
|
45,998 |
|
Taxes,
other than income taxes |
|
7,109 |
|
|
|
7,403 |
|
Accrued
income taxes |
|
2,706 |
|
|
|
6,136 |
|
Other
current liabilities |
|
39,022 |
|
|
|
40,017 |
|
Total current liabilities |
|
158,132 |
|
|
|
166,727 |
|
Long-term
obligations, less current maturities |
|
133,894 |
|
|
|
211,982 |
|
Other
liabilities |
|
57,159 |
|
|
|
61,657 |
|
Total liabilities |
|
349,185 |
|
|
|
440,366 |
|
Stockholders’
investment: |
|
|
|
Common
stock: |
|
|
|
Class A nonvoting common stock—Issued 51,261,487 and
51,261,487 shares, respectively and outstanding 47,738,671 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 |
|
321,936 |
|
|
|
317,001 |
|
Earnings
retained in the business |
|
492,411 |
|
|
|
453,371 |
|
Treasury
stock—3,522,816 and 4,340,513 shares, respectively of Class A
nonvoting common stock, at cost |
|
(87,493 |
) |
|
|
(108,714 |
) |
Accumulated other comprehensive loss |
|
(63,339 |
) |
|
|
(54,745 |
) |
Other |
|
— |
|
|
|
(3,863 |
) |
Total stockholders’ investment |
|
664,063 |
|
|
|
603,598 |
|
Total |
$ |
1,013,248 |
|
|
$ |
1,043,964 |
|
|
|
|
|
BRADY
CORPORATION AND SUBSIDIARIES |
|
|
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS |
|
|
|
|
(Unaudited; Dollars in
thousands) |
|
|
|
|
|
Nine months ended April 30, |
|
|
|
2017 |
|
|
|
2016 |
|
|
Operating
activities: |
|
|
|
|
Net earnings |
$ |
70,403 |
|
|
$ |
54,974 |
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities: |
|
|
|
|
Depreciation and amortization |
|
20,789 |
|
|
|
24,896 |
|
|
Stock-based compensation expense |
|
7,445 |
|
|
|
6,247 |
|
|
Deferred
income taxes |
|
(2,707 |
) |
|
|
3,169 |
|
|
Changes
in operating assets and liabilities: |
|
|
|
|
Accounts
receivable |
|
(931 |
) |
|
|
4,679 |
|
|
Inventories |
|
666 |
|
|
|
4,556 |
|
|
Prepaid
expenses and other assets |
|
(1,987 |
) |
|
|
(734 |
) |
|
Accounts
payable and other liabilities |
|
754 |
|
|
|
3,432 |
|
|
Income
taxes |
|
(3,270 |
) |
|
|
(2,669 |
) |
|
Net cash
provided by operating activities |
|
91,162 |
|
|
|
98,550 |
|
|
|
|
|
|
|
Investing
activities: |
|
|
|
|
Purchases
of property, plant and equipment |
|
(10,856 |
) |
|
|
(7,468 |
) |
|
Other |
|
38 |
|
|
|
1,987 |
|
|
Net cash
used in investing activities |
|
(10,818 |
) |
|
|
(5,481 |
) |
|
|
|
|
|
|
Financing
activities: |
|
|
|
|
Payment
of dividends |
|
(31,362 |
) |
|
|
(30,603 |
) |
|
Proceeds
from exercise of stock options |
|
18,674 |
|
|
|
663 |
|
|
Purchase
of treasury stock |
|
— |
|
|
|
(23,552 |
) |
|
(Repayments) proceeds from borrowing on credit facilities |
|
(60,415 |
) |
|
|
28,819 |
|
|
Principal
payments on debt |
|
(16,371 |
) |
|
|
(42,514 |
) |
|
Debt
issuance costs |
|
— |
|
|
|
(803 |
) |
|
Income
tax on equity-based compensation, and other |
|
(512 |
) |
|
|
(1,238 |
) |
|
Net cash
used in financing activities |
|
(89,986 |
) |
|
|
(69,228 |
) |
|
|
|
|
|
|
Effect of exchange rate
changes on cash |
|
(2,509 |
) |
|
|
3,263 |
|
|
|
|
|
|
|
Net (decrease) increase
in cash and cash equivalents |
|
(12,151 |
) |
|
|
27,104 |
|
|
Cash and cash
equivalents, beginning of period |
|
141,228 |
|
|
|
114,492 |
|
|
|
|
|
|
|
Cash and cash
equivalents, end of period |
$ |
129,077 |
|
|
$ |
141,596 |
|
|
|
|
|
|
|
BRADY
CORPORATION AND SUBSIDIARIES |
|
|
|
|
|
|
|
|
SEGMENT
INFORMATION |
|
|
|
|
|
|
|
|
(Unaudited; Dollars in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended April 30, |
|
Nine months Ended April 30, |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
SALES TO EXTERNAL CUSTOMERS |
|
|
|
|
|
|
|
|
ID
Solutions |
$ |
196,880 |
|
|
$ |
201,482 |
|
|
$ |
589,106 |
|
|
$ |
592,282 |
|
|
Workplace
Safety |
|
79,047 |
|
|
|
85,334 |
|
|
|
234,998 |
|
|
|
246,237 |
|
|
Total |
$ |
275,927 |
|
|
$ |
286,816 |
|
|
$ |
824,104 |
|
|
$ |
838,519 |
|
|
|
|
|
|
|
|
|
|
|
SALES INFORMATION |
|
|
|
|
|
|
|
|
ID Solutions |
|
|
|
|
|
|
|
|
Organic |
|
(0.8 |
)% |
|
|
(0.9 |
)% |
|
|
0.6 |
% |
|
|
(0.8 |
)% |
|
Currency |
|
(1.5 |
)% |
|
|
(1.1 |
)% |
|
|
(1.1 |
)% |
|
|
(3.7 |
)% |
|
Total |
|
(2.3 |
)% |
|
|
(2.0 |
)% |
|
|
(0.5 |
)% |
|
|
(4.5 |
)% |
|
Workplace Safety |
|
|
|
|
|
|
|
|
Organic |
|
(4.6 |
)% |
|
|
1.7 |
% |
|
|
(2.5 |
)% |
|
|
(0.4 |
)% |
|
Currency |
|
(2.9 |
)% |
|
|
(0.9 |
)% |
|
|
(2.1 |
)% |
|
|
(6.0 |
)% |
|
Total |
|
(7.5 |
)% |
|
|
0.8 |
% |
|
|
(4.6 |
)% |
|
|
(6.4 |
)% |
|
Total Company |
|
|
|
|
|
|
|
|
Organic |
|
(1.9 |
)% |
|
|
(0.1 |
)% |
|
|
(0.3 |
)% |
|
|
(0.7 |
)% |
|
Currency |
|
(1.9 |
)% |
|
|
(1.1 |
)% |
|
|
(1.4 |
)% |
|
|
(4.3 |
)% |
|
Total |
|
(3.8 |
)% |
|
|
(1.2 |
)% |
|
|
(1.7 |
)% |
|
|
(5.0 |
)% |
|
|
|
|
|
|
|
|
|
|
SEGMENT
PROFIT |
|
|
|
|
|
|
|
|
ID
Solutions |
$ |
32,633 |
|
|
$ |
31,898 |
|
|
$ |
94,676 |
|
|
$ |
80,385 |
|
|
Workplace
Safety |
|
5,120 |
|
|
|
6,012 |
|
|
|
17,615 |
|
|
|
21,690 |
|
|
Total |
$ |
37,753 |
|
|
$ |
37,910 |
|
|
$ |
112,291 |
|
|
$ |
102,075 |
|
|
SEGMENT PROFIT
AS A PERCENT OF SALES |
|
|
|
|
|
|
|
|
ID
Solutions |
|
16.6 |
% |
|
|
15.8 |
% |
|
|
16.1 |
% |
|
|
13.6 |
% |
|
Workplace
Safety |
|
6.5 |
% |
|
|
7.0 |
% |
|
|
7.5 |
% |
|
|
8.8 |
% |
|
Total |
|
13.7 |
% |
|
|
13.2 |
% |
|
|
13.6 |
% |
|
|
12.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended April 30, |
|
Nine months Ended April 30, |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
Total
segment profit |
$ |
37,753 |
|
|
$ |
37,910 |
|
|
$ |
112,291 |
|
|
$ |
102,075 |
|
|
Unallocated
amounts: |
|
|
|
|
|
|
|
|
Administrative costs |
|
(6,203 |
) |
|
|
(7,126 |
) |
|
|
(17,571 |
) |
|
|
(17,600 |
) |
|
Investment and other income (expense) |
|
453 |
|
|
|
721 |
|
|
|
560 |
|
|
|
(1,030 |
) |
|
Interest
expense |
|
(1,375 |
) |
|
|
(1,838 |
) |
|
|
(4,565 |
) |
|
|
(6,119 |
) |
|
Earnings
before income taxes |
$ |
30,628 |
|
|
$ |
29,667 |
|
|
$ |
90,715 |
|
|
$ |
77,326 |
|
|
|
|
|
|
|
|
|
|
|
For More Information:
Investor contact: Ann Thornton 414-438-6887
Media contact: Kate Venne 414-358-5176
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