Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world
leader in identification solutions, today reported its financial
results for its fiscal 2018 fourth quarter ended July 31,
2018.
Quarter Ended July 31, 2018 Financial
Results:Earnings before income taxes increased 26.0
percent to $45.2 million for the fourth quarter of fiscal 2018
compared to $35.9 million for the fourth quarter of fiscal
2017. Earnings before income taxes includes a gain on the
sale of the Runelandhs business of $4.7 million in the fourth
quarter of fiscal 2018. The gain on the sale represents
approximately half of the increase in earnings before income
taxes.
Net earnings for the quarter ended July 31, 2018, were $35.0
million compared to $25.2 million in the same quarter last
year. The sale of the Runelandhs business increased net
earnings by $4.7 million in the fourth quarter of fiscal 2018.
Earnings per diluted Class A Nonvoting Common Share were $0.66
for the fourth quarter of fiscal 2018, compared to $0.48 in the
same quarter last year. Results were increased by
approximately $0.09 per diluted Class A Nonvoting Common Share due
to the sale of the Runelandhs business.
Sales for the quarter ended July 31, 2018 increased 2.9 percent
to $297.5 million compared to $289.2 million in the same quarter
last year. By segment, sales increased 3.1 percent in
Identification Solutions and 2.3 percent in Workplace Safety, which
consisted of organic sales growth of 2.4 percent in Identification
Solutions and 3.0 percent in Workplace Safety.
Year Ended July 31, 2018 Financial
Results:Earnings before income taxes increased 20.0
percent, finishing at $152.0 million for the year ended July 31,
2018, compared to $126.6 million last year. Fiscal 2018
results include a gain on the sale of the Runelandhs business of
$4.7 million.
Net earnings for the year ended July 31, 2018, were $91.1
million compared to $95.6 million last year. During the year
ended July 31, 2018, net earnings were reduced by $21.1 million due
to income tax charges primarily related to the enactment of the
U.S. tax legislation in the second quarter. The sale of the
Runelandhs business increased net earnings by $4.7 million in the
current fiscal year. The prior year ended July 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 $1.73
for the year ended July 31, 2018, compared to $1.84 in the same
period last year. Fiscal 2018 results were decreased by
approximately $0.40 per diluted Class A Nonvoting Common Share due
to income tax charges primarily related to the enactment of the
U.S. tax legislation, and results were increased by approximately
$0.09 per diluted Class A Nonvoting Common Share due to the sale of
the Runelandhs business. Income tax expense in the prior year
was impacted by a cash repatriation which increased earnings per
diluted Class A Nonvoting Common Share by approximately
$0.09.
Sales for the year ended July 31, 2018 increased 5.4 percent to
$1.17 billion compared to $1.11 billion for the year ended July 31,
2017. By segment, sales increased 5.7 percent in
Identification Solutions and 4.7 percent in Workplace Safety, which
consisted of organic sales growth of 3.4 percent in Identification
Solutions and 0.7 percent in Workplace Safety.
Commentary:“This quarter marks our twelfth
consecutive quarter of year-over-year pre-tax earnings growth and
our fifth consecutive quarter of organic sales growth. This
is a direct result of our team’s consistent focus and commitment to
our strategic initiatives, which are to drive the development of
high-quality products while executing sustainable efficiency gains
throughout our businesses,” said Brady’s President and Chief
Executive Officer, J. Michael Nauman. “We believe that
continued development of innovative new products and a strong new
product pipeline are essential to Brady’s long-term success and
will result in future organic sales growth in both our
Identification Solutions and Workplace Safety businesses. Our
priorities in fiscal 2019 are to grow our pipeline of innovative
new products, provide excellent customer service, accelerate
organic sales growth, and deliver sustainable efficiencies
throughout the business.”
“We realized benefits from our organic sales growth and our
focus on operational efficiencies continues to drive profit
improvements,” said Brady’s Chief Financial Officer, Aaron
Pearce. “Our spending on research and development increased
by 14.2 percent this fiscal year while pre-tax earnings grew by
20.0 percent this year. Even after this significant
investment in research and development, we generated $143.0 million
of cash from operating activities this year, which represents 157
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 $128.8 million compared to a net cash
position of $26.2 million at the beginning of this fiscal
year. Our balance sheet continues to provide significant
flexibility for investments to drive long-term shareholder value
and to return funds to our shareholders.”
Fiscal 2019 Guidance:The Company expects
organic sales growth to range from 2.0 percent to 4.0 percent for
the year ending July 31, 2019. Brady expects earnings per
diluted Class A Nonvoting Common Share to range from $2.15 to
$2.25. This guidance is based upon a full-year income tax
rate in the mid-20 percent range, and depreciation and amortization
expense of approximately $26 million. The Company expects to
achieve efficiency gains in its manufacturing facilities and in
selling, general and administrative expenses while continuing to
increase investments in research and development. Capital
expenditures are anticipated to be approximately $35 million during
the year ending July 31, 2019. The Company’s fiscal 2019
guidance is based on foreign currency exchange rates as of July 31,
2018.
A webcast regarding Brady’s fiscal 2018 fourth quarter financial
results will be available at www.bradycorp.com/investors 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, 2018, employed approximately 6,200 people in its
worldwide businesses. Brady’s fiscal 2018 sales were
approximately $1.17 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; 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;
litigation, including product liability claims; Brady’s ability to
execute facility consolidations and maintain acceptable operational
service metrics; 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, 2018.
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, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net sales |
$ |
297,499 |
|
|
$ |
289,212 |
|
|
$ |
1,173,851 |
|
|
$ |
1,113,316 |
|
Cost of products
sold |
|
150,047 |
|
|
|
145,345 |
|
|
|
585,560 |
|
|
|
555,024 |
|
Gross
margin |
|
147,452 |
|
|
|
143,867 |
|
|
|
588,291 |
|
|
|
558,292 |
|
Operating
expenses: |
|
|
|
|
|
|
|
Research
and development |
|
11,741 |
|
|
|
11,047 |
|
|
|
45,253 |
|
|
|
39,624 |
|
Selling,
general and administrative |
|
90,931 |
|
|
|
96,525 |
|
|
|
390,342 |
|
|
|
387,653 |
|
Total
operating expenses |
|
102,672 |
|
|
|
107,572 |
|
|
|
435,595 |
|
|
|
427,277 |
|
|
|
|
|
|
|
|
|
Operating
income |
|
44,780 |
|
|
|
36,295 |
|
|
|
152,696 |
|
|
|
131,015 |
|
|
|
|
|
|
|
|
|
Other income
(expense): |
|
|
|
|
|
|
|
Investment and other income |
|
1,184 |
|
|
|
561 |
|
|
|
2,487 |
|
|
|
1,121 |
|
Interest
expense |
|
(715 |
) |
|
|
(939 |
) |
|
|
(3,168 |
) |
|
|
(5,504 |
) |
|
|
|
|
|
|
|
|
Earnings before income
taxes |
|
45,249 |
|
|
|
35,917 |
|
|
|
152,015 |
|
|
|
126,632 |
|
|
|
|
|
|
|
|
|
Income tax expense |
|
10,298 |
|
|
|
10,675 |
|
|
|
60,955 |
|
|
|
30,987 |
|
|
|
|
|
|
|
|
|
Net
earnings |
$ |
34,951 |
|
|
$ |
25,242 |
|
|
$ |
91,060 |
|
|
$ |
95,645 |
|
|
|
|
|
|
|
|
|
Net earnings per
Class A Nonvoting Common Share: |
|
|
|
|
|
|
|
Basic |
$ |
0.67 |
|
|
$ |
0.49 |
|
|
$ |
1.76 |
|
|
$ |
1.87 |
|
Diluted |
$ |
0.66 |
|
|
$ |
0.48 |
|
|
$ |
1.73 |
|
|
$ |
1.84 |
|
Dividends |
$ |
0.21 |
|
|
$ |
0.21 |
|
|
$ |
0.83 |
|
|
$ |
0.82 |
|
|
|
|
|
|
|
|
|
Net earnings per Class
B Voting Common Share: |
|
|
|
|
|
|
|
Basic |
$ |
0.67 |
|
|
$ |
0.49 |
|
|
$ |
1.75 |
|
|
$ |
1.86 |
|
Diluted |
$ |
0.66 |
|
|
$ |
0.48 |
|
|
$ |
1.72 |
|
|
$ |
1.83 |
|
Dividends |
$ |
0.21 |
|
|
$ |
0.21 |
|
|
$ |
0.81 |
|
|
$ |
0.80 |
|
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding: |
|
|
|
|
|
|
|
Basic |
|
51,822 |
|
|
|
51,307 |
|
|
|
51,677 |
|
|
|
51,056 |
|
Diluted |
|
52,658 |
|
|
|
52,180 |
|
|
|
52,524 |
|
|
|
51,956 |
|
|
|
|
|
|
|
|
|
BRADY CORPORATION AND SUBSIDIARIES
|
CONSOLIDATED BALANCE SHEETS |
(Unaudited;
Dollars in thousands) |
|
|
|
|
|
July 31, 2018 |
|
July 31, 2017 |
ASSETS |
|
|
|
Current
assets: |
|
|
|
Cash and
cash equivalents |
$ |
181,427 |
|
|
$ |
133,944 |
|
Accounts
receivable—net |
|
161,282 |
|
|
|
149,638 |
|
Inventories: |
|
|
|
Finished
products |
|
73,133 |
|
|
|
69,760 |
|
Work-in-process |
|
19,903 |
|
|
|
18,117 |
|
Raw
materials and supplies |
|
20,035 |
|
|
|
19,147 |
|
Total
inventories |
|
113,071 |
|
|
|
107,024 |
|
Prepaid
expenses and other current assets |
|
15,559 |
|
|
|
17,208 |
|
Total current assets |
|
471,339 |
|
|
|
407,814 |
|
Other
assets: |
|
|
|
Goodwill |
|
419,815 |
|
|
|
437,697 |
|
Other
intangible assets |
|
42,588 |
|
|
|
53,076 |
|
Deferred
income taxes |
|
7,582 |
|
|
|
35,456 |
|
Other |
|
17,662 |
|
|
|
18,077 |
|
Property, plant
and equipment: |
|
|
|
Cost: |
|
|
|
Land |
|
6,994 |
|
|
|
7,470 |
|
Buildings
and improvements |
|
96,245 |
|
|
|
98,228 |
|
Machinery
and equipment |
|
270,989 |
|
|
|
261,192 |
|
Construction in progress |
|
4,495 |
|
|
|
4,109 |
|
|
|
378,723 |
|
|
|
370,999 |
|
Less
accumulated depreciation |
|
280,778 |
|
|
|
272,896 |
|
Property, plant and equipment—net |
|
97,945 |
|
|
|
98,103 |
|
Total |
$ |
1,056,931 |
|
|
$ |
1,050,223 |
|
LIABILITIES AND STOCKHOLDERS’ INVESTMENT |
|
|
|
Current
liabilities: |
|
|
|
Notes
payable |
$ |
— |
|
|
$ |
3,228 |
|
Accounts
payable |
|
66,538 |
|
|
|
66,817 |
|
Wages and
amounts withheld from employees |
|
67,619 |
|
|
|
58,192 |
|
Taxes,
other than income taxes |
|
8,318 |
|
|
|
7,970 |
|
Accrued
income taxes |
|
3,885 |
|
|
|
7,373 |
|
Other
current liabilities |
|
44,567 |
|
|
|
43,618 |
|
Total current liabilities |
|
190,927 |
|
|
|
187,198 |
|
Long-term
obligations |
|
52,618 |
|
|
|
104,536 |
|
Other
liabilities |
|
61,274 |
|
|
|
58,349 |
|
Total liabilities |
|
304,819 |
|
|
|
350,083 |
|
Stockholders’
investment: |
|
|
|
Common
stock: |
|
|
|
Class A nonvoting common stock—Issued 51,261,487 and
51,261,487 shares, respectively, and outstanding 48,393,617 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 |
|
325,631 |
|
|
|
322,608 |
|
Earnings
retained in the business |
|
553,454 |
|
|
|
507,136 |
|
Treasury
stock—2,867,870 and 3,446,669 shares, respectively, of Class A
nonvoting common stock, at cost |
|
(71,120 |
) |
|
|
(85,470 |
) |
Accumulated other comprehensive loss |
|
(56,401 |
) |
|
|
(44,682 |
) |
Total stockholders’ investment |
|
752,112 |
|
|
|
700,140 |
|
Total |
$ |
1,056,931 |
|
|
$ |
1,050,223 |
|
|
|
|
|
BRADY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(Unaudited;
Dollars in thousands) |
|
Year ended July 31, |
|
2018 |
|
2017 |
Operating
activities: |
|
|
|
Net earnings |
$ |
91,060 |
|
|
$ |
95,645 |
|
Adjustments to
reconcile net earnings to net cash provided by operating
activities: |
|
|
|
Depreciation and amortization |
|
25,442 |
|
|
|
27,303 |
|
Non-cash
portion of stock-based compensation expense |
|
9,980 |
|
|
|
9,495 |
|
Gain on
sale of business, net |
|
(4,666 |
) |
|
|
— |
|
Deferred
income taxes |
|
33,656 |
|
|
|
(8,618 |
) |
Changes
in operating assets and liabilities: |
|
|
|
Accounts
receivable |
|
(16,612 |
) |
|
|
766 |
|
Inventories |
|
(7,563 |
) |
|
|
(5,687 |
) |
Prepaid
expenses and other assets |
|
1,747 |
|
|
|
1,812 |
|
Accounts
payable and other liabilities |
|
13,091 |
|
|
|
22,255 |
|
Income
taxes |
|
(3,093 |
) |
|
|
1,061 |
|
Net cash
provided by operating activities |
|
143,042 |
|
|
|
144,032 |
|
|
|
|
|
Investing
activities: |
|
|
|
Purchases
of property, plant and equipment |
|
(21,777 |
) |
|
|
(15,167 |
) |
Divestiture of business, net of cash transferred with business |
|
19,141 |
|
|
|
— |
|
Other |
|
(269 |
) |
|
|
(86 |
) |
Net cash
used in investing activities |
|
(2,905 |
) |
|
|
(15,253 |
) |
|
|
|
|
Financing
activities: |
|
|
|
Payment
of dividends |
|
(42,873 |
) |
|
|
(41,880 |
) |
Proceeds
from exercise of stock options |
|
12,099 |
|
|
|
19,728 |
|
Proceeds
from borrowing on credit facilities |
|
23,221 |
|
|
|
180,320 |
|
Repayment
of borrowing on credit facilities |
|
(78,419 |
) |
|
|
(244,268 |
) |
Principal
payments on debt |
|
— |
|
|
|
(49,302 |
) |
Income
tax on equity-based compensation, and other |
|
(4,708 |
) |
|
|
(839 |
) |
Net cash
used in financing activities |
|
(90,680 |
) |
|
|
(136,241 |
) |
|
|
|
|
Effect of exchange rate
changes on cash |
|
(1,974 |
) |
|
|
178 |
|
|
|
|
|
Net increase (decrease)
in cash and cash equivalents |
|
47,483 |
|
|
|
(7,284 |
) |
Cash and cash
equivalents, beginning of period |
|
133,944 |
|
|
|
141,228 |
|
|
|
|
|
Cash and cash
equivalents, end of period |
$ |
181,427 |
|
|
$ |
133,944 |
|
|
|
|
|
Supplemental
disclosures: |
|
|
|
Cash paid during the
period for: |
|
|
|
Interest |
$ |
2,976 |
|
|
$ |
5,766 |
|
Income
taxes |
|
33,267 |
|
|
|
31,885 |
|
|
|
|
|
BRADY CORPORATION AND SUBSIDIARIES |
SEGMENT INFORMATION |
(Unaudited; Dollars in thousands) |
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, |
|
Year Ended July 31, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
NET SALES |
|
|
|
|
|
|
|
ID
Solutions |
$ |
217,796 |
|
|
$ |
211,286 |
|
|
$ |
846,087 |
|
|
$ |
800,392 |
|
Workplace
Safety |
|
79,703 |
|
|
|
77,926 |
|
|
|
327,764 |
|
|
|
312,924 |
|
Total |
$ |
297,499 |
|
|
$ |
289,212 |
|
|
$ |
1,173,851 |
|
|
$ |
1,113,316 |
|
|
|
|
|
|
|
|
|
SALES INFORMATION |
|
|
|
|
|
|
|
ID Solutions |
|
|
|
|
|
|
|
Organic |
|
2.4 |
% |
|
|
4.4 |
% |
|
|
3.4 |
% |
|
|
1.6 |
% |
Currency |
|
0.7 |
% |
|
|
(0.4 |
)% |
|
|
2.3 |
% |
|
|
(1.0 |
)% |
Divestiture |
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
Total |
|
3.1 |
% |
|
|
4.0 |
% |
|
|
5.7 |
% |
|
|
0.6 |
% |
Workplace Safety |
|
|
|
|
|
|
|
Organic |
|
3.0 |
% |
|
|
(0.6 |
)% |
|
|
0.7 |
% |
|
|
(2.0 |
)% |
Currency |
|
1.6 |
% |
|
|
(0.6 |
)% |
|
|
4.6 |
% |
|
|
(1.7 |
)% |
Divestiture |
|
(2.3 |
)% |
|
|
— |
% |
|
|
(0.6 |
)% |
|
|
— |
% |
Total |
|
2.3 |
% |
|
|
(1.2 |
)% |
|
|
4.7 |
% |
|
|
(3.7 |
)% |
Total Company |
|
|
|
|
|
|
|
Organic |
|
2.5 |
% |
|
|
3.0 |
% |
|
|
2.6 |
% |
|
|
0.5 |
% |
Currency |
|
1.0 |
% |
|
|
(0.5 |
)% |
|
|
3.0 |
% |
|
|
(1.2 |
)% |
Divestiture |
|
(0.6 |
)% |
|
|
— |
% |
|
|
(0.2 |
)% |
|
|
— |
% |
Total |
|
2.9 |
% |
|
|
2.5 |
% |
|
|
5.4 |
% |
|
|
(0.7 |
)% |
|
|
|
|
|
|
|
|
SEGMENT
PROFIT |
|
|
|
|
|
|
|
ID
Solutions |
$ |
36,515 |
|
|
$ |
35,896 |
|
|
$ |
143,411 |
|
|
$ |
130,572 |
|
Workplace
Safety |
|
10,675 |
|
|
|
7,939 |
|
|
|
31,712 |
|
|
|
25,554 |
|
Total |
$ |
47,190 |
|
|
$ |
43,835 |
|
|
$ |
175,123 |
|
|
$ |
156,126 |
|
SEGMENT PROFIT
AS A PERCENT OF SALES |
|
|
|
|
|
|
|
ID
Solutions |
|
16.8 |
% |
|
|
17.0 |
% |
|
|
16.9 |
% |
|
|
16.3 |
% |
Workplace
Safety |
|
13.4 |
% |
|
|
10.2 |
% |
|
|
9.7 |
% |
|
|
8.2 |
% |
Total |
|
15.9 |
% |
|
|
15.2 |
% |
|
|
14.9 |
% |
|
|
14.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, |
|
Year Ended July 31, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Total
segment profit |
$ |
47,190 |
|
|
$ |
43,835 |
|
|
$ |
175,123 |
|
|
$ |
156,126 |
|
Unallocated
amounts: |
|
|
|
|
|
|
|
Administrative costs |
|
(7,076 |
) |
|
|
(7,540 |
) |
|
|
(27,093 |
) |
|
|
(25,111 |
) |
Gain on
divestiture |
|
4,666 |
|
|
|
- |
|
|
|
4,666 |
|
|
|
- |
|
Investment and other income |
|
1,184 |
|
|
|
561 |
|
|
|
2,487 |
|
|
|
1,121 |
|
Interest
expense |
|
(715 |
) |
|
|
(939 |
) |
|
|
(3,168 |
) |
|
|
(5,504 |
) |
Earnings
before income taxes |
$ |
45,249 |
|
|
$ |
35,917 |
|
|
$ |
152,015 |
|
|
$ |
126,632 |
|
|
|
|
|
|
|
|
|
For More Information:Investor contact: Ann Thornton
414-438-6887Media contact: Kate Venne 414-358-5176
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