Brady Corporation (NYSE:BRC) (“Brady” or “Company”), a world leader
in identification solutions, today reported its financial results
for its fiscal 2017 fourth quarter ended July 31, 2017.
Quarter Ended July 31, 2017 Financial
Results:Net earnings for the quarter ended July 31, 2017,
were $25.2 million compared to $25.1 million in the same quarter
last year. Net earnings were significantly impacted by
quarterly fluctuations in the income tax rate which was 29.7
percent for the quarter ended July 31, 2017, and 21.5 percent for
the quarter ended July 31, 2016. Earnings before income taxes
increased 12.2 percent to $35.9 million for the quarter ended July
31, 2017 compared to $32.0 million for the quarter ended July 31,
2016.
Earnings per diluted Class A Nonvoting Common Share were $0.48
for the quarter ended July 31, 2017, compared to $0.49 in the same
quarter last year.
Sales for the quarter ended July 31, 2017, increased 2.5 percent
to $289.2 million compared to $282.1 million in the same quarter
last year. Total organic sales increased 3.0 percent and the
impact of foreign currency translation decreased sales by 0.5
percent. By segment, organic sales increased 4.4 percent in
Identification Solutions and decreased 0.6 percent in Workplace
Safety.
Year Ended July 31, 2017 Financial Results:Net
earnings for the year ended July 31, 2017, were $95.6 million
compared to $80.1 million last year. Earnings before income
taxes increased 15.8 percent to $126.6 million for the year ended
July 31, 2017, compared to $109.3 million last year.
Earnings per diluted Class A Nonvoting Common Share were $1.84
for the year ended July 31, 2017, compared to $1.58 last year.
Sales for the year ended July 31, 2017, decreased 0.7 percent to
$1.11 billion compared to $1.12 billion last year. Total
organic sales increased 0.5 percent and foreign currency
translation decreased sales by 1.2 percent. By segment,
organic sales increased 1.6 percent in Identification Solutions and
decreased 2.0 percent in Workplace Safety.
Commentary:“We finished fiscal 2017 with our
eighth consecutive quarter of year-over-year improvement in pre-tax
earnings. This is a direct result of our organic sales
growth, our consistent focus on driving efficiencies throughout our
SG&A structure, and our improved manufacturing processes,” said
Brady’s President and Chief Executive Officer, J. Michael
Nauman. “Organic sales growth was 3.0 percent this
quarter. Our Identification Solutions business was the driver
of our organic sales growth and is where we have been investing the
most in the development of innovative new products. This is
beginning to generate improved organic sales trends. Our
priorities for fiscal 2018 remain unchanged, which are to grow our
pipeline of innovative new products, accelerate organic sales
growth, provide excellent customer service and deliver operational
efficiencies throughout our business. We continue to focus on
the long-term by taking actions today that we believe will result
in sustainable organic sales growth into the future.”
“The benefits from our organic sales growth were supplemented by
our focus on operational efficiencies, our drive for sustainable
efficiency gains in our general and administrative cost structure,
and a strong focus on cash generation,” said Brady’s Chief
Financial Officer, Aaron Pearce. “During the year ended July
31, 2017, we increased our pre-tax earnings by 15.8 percent,
increased net earnings by 19.4 percent, and generated $144.0
million of cash from operating activities, which represents 151
percent of net earnings. Our cash generation was primarily
used to return funds to our shareholders in the form of dividends
and to strengthen our balance sheet. We finished the year in
a net cash position of $26.2 million compared to a net debt
position of $75.7 million at the start of this fiscal year.
Our balance sheet provides significant flexibility for
investments to drive long-term shareholder value.”
Fiscal 2018 Guidance:The Company anticipates
organic sales to increase in the low-single digits for the year
ending July 31, 2018. Brady expects earnings per diluted
Class A Common Share to range from $1.85 to $1.95. This
guidance is based upon a full-year income tax rate of approximately
27 percent to 29 percent, which is higher than fiscal 2017, and
depreciation and amortization expense of approximately $26
million. The Company expects to continue to achieve
efficiency gains in its manufacturing facilities and in selling,
general and administrative expenses while increasing investments in
research and development expenses by approximately 10 percent when
compared to fiscal 2017. Capital expenditures are anticipated
to be approximately $30 million during the year ending July 31,
2018. The Company’s fiscal 2018 guidance is based on foreign
currency exchange rates as of July 31, 2017.
A webcast regarding Brady’s fiscal 2017 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, 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; 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 July 31, |
|
Year ended July 31, |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
Net sales |
$ |
289,212 |
|
|
$ |
282,106 |
|
|
$ |
1,113,316 |
|
|
$ |
1,120,625 |
|
|
Cost of products
sold |
|
145,345 |
|
|
|
141,017 |
|
|
|
555,024 |
|
|
|
561,852 |
|
|
Gross
margin |
|
143,867 |
|
|
|
141,089 |
|
|
|
558,292 |
|
|
|
558,773 |
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
Research
and development |
|
11,047 |
|
|
|
9,268 |
|
|
|
39,624 |
|
|
|
35,799 |
|
|
Selling,
general and administrative |
|
96,525 |
|
|
|
98,418 |
|
|
|
387,653 |
|
|
|
405,096 |
|
|
Total
operating expenses |
|
107,572 |
|
|
|
107,686 |
|
|
|
427,277 |
|
|
|
440,895 |
|
|
|
|
|
|
|
|
|
|
|
Operating
income |
|
36,295 |
|
|
|
33,403 |
|
|
|
131,015 |
|
|
|
117,878 |
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense): |
|
|
|
|
|
|
|
|
Investment and other income (expense) |
|
561 |
|
|
|
321 |
|
|
|
1,121 |
|
|
|
(709 |
) |
|
Interest
expense |
|
(939 |
) |
|
|
(1,705 |
) |
|
|
(5,504 |
) |
|
|
(7,824 |
) |
|
|
|
|
|
|
|
|
|
|
Earnings before income
taxes |
|
35,917 |
|
|
|
32,019 |
|
|
|
126,632 |
|
|
|
109,345 |
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
10,675 |
|
|
|
6,883 |
|
|
|
30,987 |
|
|
|
29,235 |
|
|
|
|
|
|
|
|
|
|
|
Net
earnings |
$ |
25,242 |
|
|
$ |
25,136 |
|
|
$ |
95,645 |
|
|
$ |
80,110 |
|
|
|
|
|
|
|
|
|
|
|
Net earnings per
Class A Nonvoting Common Share: |
|
|
|
|
|
|
|
|
Basic |
$ |
0.49 |
|
|
$ |
0.50 |
|
|
$ |
1.87 |
|
|
$ |
1.59 |
|
|
Diluted |
$ |
0.48 |
|
|
$ |
0.49 |
|
|
$ |
1.84 |
|
|
$ |
1.58 |
|
|
Dividends |
$ |
0.21 |
|
|
$ |
0.20 |
|
|
$ |
0.82 |
|
|
$ |
0.81 |
|
|
|
|
|
|
|
|
|
|
|
Net earnings per Class
B Voting Common Share: |
|
|
|
|
|
|
|
|
Basic |
$ |
0.49 |
|
|
$ |
0.50 |
|
|
$ |
1.86 |
|
|
$ |
1.57 |
|
|
Diluted |
$ |
0.48 |
|
|
$ |
0.49 |
|
|
$ |
1.83 |
|
|
$ |
1.56 |
|
|
Dividends |
$ |
0.21 |
|
|
$ |
0.20 |
|
|
$ |
0.80 |
|
|
$ |
0.79 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding (in thousands): |
|
|
|
|
|
|
|
|
Basic |
|
51,307 |
|
|
|
50,355 |
|
|
|
51,056 |
|
|
|
50,541 |
|
|
Diluted |
|
52,180 |
|
|
|
50,834 |
|
|
|
51,956 |
|
|
|
50,769 |
|
|
BRADY CORPORATION AND
SUBSIDIARIES |
|
|
|
CONSOLIDATED BALANCE
SHEETS |
|
|
|
(Unaudited; Dollars in
thousands) |
|
|
|
|
|
|
|
|
July 31, 2017 |
|
July 31, 2016 |
ASSETS |
|
|
|
Current
assets: |
|
|
|
Cash and
cash equivalents |
$ |
133,944 |
|
|
$ |
141,228 |
|
Accounts
receivable—net |
|
149,638 |
|
|
|
147,333 |
|
Inventories: |
|
|
|
Finished
products |
|
69,760 |
|
|
|
64,313 |
|
Work-in-process |
|
18,117 |
|
|
|
16,678 |
|
Raw
materials and supplies |
|
19,147 |
|
|
|
18,436 |
|
Total
inventories |
|
107,024 |
|
|
|
99,427 |
|
Prepaid
expenses and other current assets |
|
17,208 |
|
|
|
19,436 |
|
Total current assets |
|
407,814 |
|
|
|
407,424 |
|
Other
assets: |
|
|
|
Goodwill |
|
437,697 |
|
|
|
429,871 |
|
Other
intangible assets |
|
53,076 |
|
|
|
59,806 |
|
Deferred
income taxes |
|
35,456 |
|
|
|
27,238 |
|
Other |
|
18,077 |
|
|
|
17,181 |
|
Property, plant
and equipment: |
|
|
|
Cost: |
|
|
|
Land |
|
7,470 |
|
|
|
5,809 |
|
Buildings
and improvements |
|
98,228 |
|
|
|
95,355 |
|
Machinery
and equipment |
|
261,192 |
|
|
|
256,549 |
|
Construction in progress |
|
4,109 |
|
|
|
2,842 |
|
|
|
370,999 |
|
|
|
360,555 |
|
Less
accumulated depreciation |
|
272,896 |
|
|
|
258,111 |
|
Property, plant and equipment—net |
|
98,103 |
|
|
|
102,444 |
|
Total |
$ |
1,050,223 |
|
|
$ |
1,043,964 |
|
LIABILITIES AND STOCKHOLDERS’ INVESTMENT |
|
|
|
Current
liabilities: |
|
|
|
Notes
payable |
$ |
3,228 |
|
|
$ |
4,928 |
|
Accounts
payable |
|
66,817 |
|
|
|
62,245 |
|
Wages and
amounts withheld from employees |
|
58,192 |
|
|
|
45,998 |
|
Taxes,
other than income taxes |
|
7,970 |
|
|
|
7,403 |
|
Accrued
income taxes |
|
7,373 |
|
|
|
6,136 |
|
Other
current liabilities |
|
43,618 |
|
|
|
40,017 |
|
Total current liabilities |
|
187,198 |
|
|
|
166,727 |
|
Long-term
obligations |
|
104,536 |
|
|
|
211,982 |
|
Other
liabilities |
|
58,349 |
|
|
|
61,657 |
|
Total liabilities |
|
350,083 |
|
|
|
440,366 |
|
Stockholders’
investment: |
|
|
|
Common
stock: |
|
|
|
Class A nonvoting common stock—Issued 51,261,487 shares and
outstanding 47,814,818 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 |
|
322,608 |
|
|
|
317,001 |
|
Earnings
retained in the business |
|
507,136 |
|
|
|
453,371 |
|
Treasury
stock—3,446,669 and 4,340,513 shares, respectively of Class A
nonvoting common stock, at cost |
|
(85,470 |
) |
|
|
(108,714 |
) |
Accumulated other comprehensive loss |
|
(44,682 |
) |
|
|
(54,745 |
) |
Other |
|
— |
|
|
|
(3,863 |
) |
Total stockholders’ investment |
|
700,140 |
|
|
|
603,598 |
|
Total |
$ |
1,050,223 |
|
|
$ |
1,043,964 |
|
BRADY CORPORATION AND
SUBSIDIARIES |
|
|
|
|
CONSOLIDATED STATEMENTS
OF CASH FLOWS |
|
|
|
|
(Unaudited; Dollars in
thousands) |
|
|
|
|
|
|
|
|
|
|
Year ended July 31, |
|
|
|
2017 |
|
|
|
2016 |
|
|
Operating
activities: |
|
|
|
|
Net earnings |
$ |
95,645 |
|
|
$ |
80,110 |
|
|
Adjustments to
reconcile net earnings to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and amortization |
|
27,303 |
|
|
|
32,432 |
|
|
Non-cash
portion of stock-based compensation expense |
|
9,495 |
|
|
|
8,154 |
|
|
Deferred
income taxes |
|
(8,618 |
) |
|
|
2,085 |
|
|
Changes in operating
assets and liabilities: |
|
|
|
|
Accounts
receivable |
|
766 |
|
|
|
8,159 |
|
|
Inventories |
|
(5,687 |
) |
|
|
4,833 |
|
|
Prepaid
expenses and other assets |
|
1,812 |
|
|
|
475 |
|
|
Accounts
payable and accrued liabilities |
|
22,255 |
|
|
|
3,928 |
|
|
Income
taxes |
|
1,061 |
|
|
|
(1,200 |
) |
|
Net cash
provided by operating activities |
|
144,032 |
|
|
|
138,976 |
|
|
|
|
|
|
|
Investing
activities: |
|
|
|
|
Purchases
of property, plant and equipment |
|
(15,167 |
) |
|
|
(17,140 |
) |
|
Other |
|
(86 |
) |
|
|
1,724 |
|
|
Net cash
used in investing activities |
|
(15,253 |
) |
|
|
(15,416 |
) |
|
|
|
|
|
|
Financing
activities: |
|
|
|
|
Payment
of dividends |
|
(41,880 |
) |
|
|
(40,808 |
) |
|
Proceeds
from exercise of stock options |
|
19,728 |
|
|
|
5,246 |
|
|
Purchases
of treasury stock |
|
— |
|
|
|
(23,552 |
) |
|
Proceeds
from borrowing on credit facilities |
|
180,320 |
|
|
|
96,276 |
|
|
Repayment
of borrowing on credit facilities |
|
(244,268 |
) |
|
|
(91,759 |
) |
|
Principal
payments on debt |
|
(49,302 |
) |
|
|
(42,514 |
) |
|
Debt
issuance costs |
|
— |
|
|
|
(803 |
) |
|
Income
tax on equity-based compensation, and other |
|
(839 |
) |
|
|
(1,662 |
) |
|
Net cash
used in financing activities |
|
(136,241 |
) |
|
|
(99,576 |
) |
|
|
|
|
|
|
Effect of exchange rate
changes on cash |
|
178 |
|
|
|
2,752 |
|
|
|
|
|
|
|
Net (decrease) increase
in cash and cash equivalents |
|
(7,284 |
) |
|
|
26,736 |
|
|
Cash and cash
equivalents, beginning of period |
|
141,228 |
|
|
|
114,492 |
|
|
|
|
|
|
|
Cash and cash
equivalents, end of period |
$ |
133,944 |
|
|
$ |
141,228 |
|
|
|
|
|
|
|
Supplemental
disclosures: |
|
|
|
|
Cash paid during the
period for: |
|
|
|
|
Interest |
$ |
5,766 |
|
|
$ |
8,528 |
|
|
Income
taxes |
|
31,885 |
|
|
|
28,497 |
|
|
BRADY CORPORATION AND
SUBSIDIARIES |
|
|
|
|
|
|
|
|
SEGMENT
INFORMATION |
|
|
|
|
|
|
|
|
(Unaudited; Dollars in
Thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, |
|
Year Ended July 31, |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
SALES |
|
|
|
|
|
|
|
|
ID
Solutions |
$ |
211,286 |
|
|
$ |
203,229 |
|
|
$ |
800,392 |
|
|
$ |
795,511 |
|
|
Workplace
Safety |
|
77,926 |
|
|
|
78,877 |
|
|
|
312,924 |
|
|
|
325,114 |
|
|
Total |
$ |
289,212 |
|
|
$ |
282,106 |
|
|
$ |
1,113,316 |
|
|
$ |
1,120,625 |
|
|
|
|
|
|
|
|
|
|
|
SALES INFORMATION |
|
|
|
|
|
|
|
|
ID Solutions |
|
|
|
|
|
|
|
|
Organic |
|
4.4 |
% |
|
|
(0.6 |
)% |
|
|
1.6 |
% |
|
|
(0.7 |
)% |
|
Currency |
|
(0.4 |
)% |
|
|
(1.2 |
)% |
|
|
(1.0 |
)% |
|
|
(3.1 |
)% |
|
Total |
|
4.0 |
% |
|
|
(1.8 |
)% |
|
|
0.6 |
% |
|
|
(3.8 |
)% |
|
Workplace Safety |
|
|
|
|
|
|
|
|
Organic |
|
(0.6 |
)% |
|
|
(1.8 |
)% |
|
|
(2.0 |
)% |
|
|
(0.7 |
)% |
|
Currency |
|
(0.6 |
)% |
|
|
(1.8 |
)% |
|
|
(1.7 |
)% |
|
|
(5.0 |
)% |
|
Total |
|
(1.2 |
)% |
|
|
(3.6 |
)% |
|
|
(3.7 |
)% |
|
|
(5.7 |
)% |
|
Total Company |
|
|
|
|
|
|
|
|
Organic |
|
3.0 |
% |
|
|
(0.9 |
)% |
|
|
0.5 |
% |
|
|
(0.7 |
)% |
|
Currency |
|
(0.5 |
)% |
|
|
(1.4 |
)% |
|
|
(1.2 |
)% |
|
|
(3.7 |
)% |
|
Total |
|
2.5 |
% |
|
|
(2.3 |
)% |
|
|
(0.7 |
)% |
|
|
(4.4 |
)% |
|
|
|
|
|
|
|
|
|
|
SEGMENT
PROFIT |
|
|
|
|
|
|
|
|
ID
Solutions |
$ |
35,896 |
|
|
$ |
31,891 |
|
|
$ |
130,572 |
|
|
$ |
112,276 |
|
|
Workplace
Safety |
|
7,939 |
|
|
|
9,102 |
|
|
|
25,554 |
|
|
|
30,792 |
|
|
Total |
$ |
43,835 |
|
|
$ |
40,993 |
|
|
$ |
156,126 |
|
|
$ |
143,068 |
|
|
SEGMENT PROFIT
AS A PERCENT OF SALES
|
|
|
|
|
|
|
|
|
ID
Solutions |
|
17.0 |
% |
|
|
15.7 |
% |
|
|
16.3 |
% |
|
|
14.1 |
% |
|
Workplace
Safety |
|
10.2 |
% |
|
|
11.5 |
% |
|
|
8.2 |
% |
|
|
9.5 |
% |
|
Total |
|
15.2 |
% |
|
|
14.5 |
% |
|
|
14.0 |
% |
|
|
12.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, |
|
Year Ended July 31, |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
Total
segment profit |
$ |
43,835 |
|
|
$ |
40,993 |
|
|
$ |
156,126 |
|
|
$ |
143,068 |
|
|
Unallocated
amounts: |
|
|
|
|
|
|
|
|
Administrative costs |
|
(7,540 |
) |
|
|
(7,590 |
) |
|
|
(25,111 |
) |
|
|
(25,190 |
) |
|
Investment and other income (expense) |
|
561 |
|
|
|
321 |
|
|
|
1,121 |
|
|
|
(709 |
) |
|
Interest
expense |
|
(939 |
) |
|
|
(1,705 |
) |
|
|
(5,504 |
) |
|
|
(7,824 |
) |
|
Earnings
before income taxes |
$ |
35,917 |
|
|
$ |
32,019 |
|
|
$ |
126,632 |
|
|
$ |
109,345 |
|
|
For More Information:
Investor contact: Ann Thornton 414-438-6887
Media contact: Kate Venne 414-358-5176
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