- Earnings per diluted Class A Nonvoting Common Share were $0.43 in the third quarter of fiscal 2017 compared to $0.42 in the same quarter of the prior year.
- Organic revenue declined 1.9 percent for the quarter ended April 30, 2017.
- Net debt was $8.9 million at April 30, 2017 compared to $100.9 million at April 30, 2016, providing flexibility for future investments.
- Earnings per diluted Class A Common Share guidance for the full year ending July 31, 2017 tightened from a range of $1.75 to $1.85 to a range of $1.80 to $1.85.
MILWAUKEE, May 25, 2017 (GLOBE NEWSWIRE) -- 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 | ||||||||