- Organic revenues increased 3.0 percent for the quarter ended July 31, 2017.
- Earnings before income taxes increased 12.2 percent to $35.9 million in the fourth quarter of fiscal 2017 compared to $32.0 million in the same quarter of the prior year.
- Earnings per diluted Class A Nonvoting Common Share were $0.48 in the fourth quarter of fiscal 2017 compared to $0.49 in the same quarter of the prior year.
- Earnings per diluted Class A Common Share guidance for the full year ending July 31, 2018 announced at a range of $1.85 to $1.95.
MILWAUKEE, Sept. 07, 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 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 | ||||||||