Brady Corporation Reports Fiscal 2018 Second Quarter Results and Increases its Fiscal 2018 EPS Guidance

Brady Corporation Reports Fiscal 2018 Second Quarter Results and Increases its Fiscal 2018 EPS Guidance

  • Earnings before income taxes increased 20.4 percent, finishing at $35.0 million in the second quarter of fiscal 2018 compared to $29.1 million in the second quarter of fiscal 2017.  This marks the 10th consecutive quarter of growth.
  • Earnings per diluted Class A Nonvoting Common Share were $0.08 in the second quarter of fiscal 2018 compared to $0.49 in the same quarter of the prior year.  Results were reduced by approximately $0.40 per diluted Class A Nonvoting Common Share due to tax charges primarily related to U.S. tax legislation enacted during the quarter.
  • Total revenues increased 7.4 percent, which consisted of organic revenue growth of 3.2 percent and an increase of 4.2 percent due to foreign currency translation.
  • Earnings per diluted Class A Common Share guidance for the full year ending July 31, 2018 was increased to a range of $1.90 to $2.00, exclusive of tax charges primarily related to the enactment of the U.S. tax legislation.

MILWAUKEE, Feb. 22, 2018 (GLOBE NEWSWIRE) -- Brady Corporation (NYSE:BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2018 second quarter ended January 31, 2018.

Quarter Ended January 31, 2018 Financial Results:
Earnings before income taxes increased 20.4 percent, finishing at $35.0 million for the second quarter of fiscal 2018 compared to $29.1 million for the second quarter of fiscal 2017.

Net earnings for the quarter ended January 31, 2018, were $4.3 million compared to $25.3 million in the same quarter last year.  During the quarter ended January 31, 2018, net earnings were reduced by $21.1 million due to income tax charges primarily related to the passage of the U.S. Tax Cuts and Jobs Act of 2017.  The prior year quarter ended January 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 $0.08 for the quarter ended January 31, 2018, compared to $0.49 in the same quarter last year.  Income tax expense in the prior year quarter ended January 31, 2017 was impacted by a cash repatriation which increased earnings per diluted Class A Nonvoting Common Share by approximately $0.09, whereas the impact on income tax expense for the quarter ended January 31, 2018 from tax charges primarily related to the enactment of the U.S. tax legislation was a reduction in earnings per diluted Class A Nonvoting Common Share of approximately $0.40.

Sales for the quarter ended January 31, 2018 increased 7.4 percent to $287.8 million compared to $268.0 million in the same quarter last year.  By segment, sales increased 8.1 percent in Identification Solutions and 5.6 percent in Workplace Safety, which consisted of organic sales growth of 4.7 percent in Identification Solutions and an organic sales decline of 0.5 percent in Workplace Safety. 

Six-Month Period Ended January 31, 2018 Financial Results:
Earnings before income taxes increased 16.1 percent, finishing at $69.8 million for the six-month period ended January 31, 2018, compared to $60.1 million for the six-month period ended January 31, 2017.

Net earnings for the six-month period ended January 31, 2018 were $30.1 million compared to $47.9 million for the six-month period ended January 31, 2017.  During the six-month period ended January 31, 2018, net earnings were reduced by $21.1 million due to tax charges primarily related to the passage of the U.S. Tax Cuts and Jobs Act of 2017.  The prior year six-month period ended January 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 $0.57 for the six-month period ended January 31, 2018, compared to $0.93 in the same six-month period last year.  Income tax expense in the prior year six-month period ended January 31, 2017 was impacted by a cash repatriation which increased earnings per diluted Class A Nonvoting Common Share by approximately $0.09, whereas the impact on income tax expense for the six-month period ended January 31, 2018 from tax charges primarily related to the enactment of U.S. tax legislation was a reduction of approximately $0.40 of earnings per diluted Class A Nonvoting Common Share. 

Sales for the six-month period ended January 31, 2018 increased 5.4 percent to $577.9 million compared to $548.2 million in the same six-month period last year.  By segment, sales increased 6.1 percent in Identification Solutions and 3.7 percent in Workplace Safety, which consisted of organic sales growth of 3.8 percent in Identification Solutions and an organic sales decline of 1.0 percent in Workplace Safety. 

Commentary:
“Our investment in the development of innovative, high-quality products is paying off as we generated more than three percent organic sales growth this quarter, which was driven by our Identification Solutions business.  This marks our tenth consecutive quarter of year-over-year pre-tax earnings improvement, which was a direct result of our focus on driving organic growth while achieving sustainable efficiency gains throughout our SG&A structure,” said Brady’s President and Chief Executive Officer, J. Michael Nauman.  “We expect to continue this positive organic sales trend as we gain momentum in our research and development processes and through the execution of our strategy in our Workplace Safety business.  Our focus is consistent and remains on the long-term by taking actions today that we believe will result in organic sales growth and profit improvements into the future.”

“Organic sales growth and our continued focus on efficiency opportunities throughout SG&A were the drivers of our profit improvement this quarter,” said Brady’s Chief Financial Officer, Aaron Pearce.  “We used our cash generation to return funds to our shareholders and to repay debt.  We repaid $27.9 million in debt during the quarter and finished in a net cash position of $44.1 million as of January 31, 2018.  Our balance sheet continues to provide significant flexibility for investments in growth opportunities to drive long-term value for our shareholders.”

Fiscal 2018 Guidance:
The Company is increasing its full year fiscal 2018 earnings per diluted Class A Nonvoting Common Share guidance from its previous range of $1.85 to $1.95 to a range of $1.90 to $2.00, exclusive of tax charges primarily related to the enactment of the U.S. Tax Cuts and Jobs Act of 2017.  Included in this guidance is low-single digit organic sales growth, depreciation and amortization expense of approximately $26 million, and capital expenditures of approximately $20 million during the year ending July 31, 2018.  The Company expects its full-year income tax rate, exclusive of charges primarily related to the enactment of the U.S. Tax Cuts and Jobs Act of 2017, to range from approximately 27 percent to 29 percent.  This guidance is based upon foreign exchange rates as of January 31, 2018.

A webcast regarding Brady’s fiscal 2018 second 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; 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; Brady’s ability to execute facility consolidations and maintain acceptable operational service metrics; litigation, including product liability claims; 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; 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, 2017.

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 January 31, Six months ended January 31, 
 2018 2017 2018 2017 
Net sales$  287,780  $  268,001  $  577,931  $  548,177  
Cost of products sold  144,088    133,843    288,174    273,661  
Gross margin  143,692    134,158    289,757    274,516  
Operating expenses:        
Research and development  11,314    9,481    21,834    18,627  
Selling, general and administrative  97,582    94,715    197,716    192,719  
Total operating expenses  108,896    104,196    219,550    211,346  
         
Operating income   34,796    29,962    70,207    63,170  
         
Other income (expense):        
Investment and other income  1,056    596    1,272    107  
Interest expense  (829)   (1,458)   (1,692)   (3,190) 
         
Earnings before income taxes  35,023    29,100    69,787    60,087  
         
Income tax expense  30,750    3,803    39,678    12,237  
         
Net earnings$  4,273  $  25,297  $  30,109  $  47,850  
         
Net earnings per Class A Nonvoting Common Share:        
Basic $  0.08  $  0.50  $  0.58  $  0.94  
Diluted $  0.08  $  0.49  $  0.57  $  0.93  
Dividends$  0.21  $  0.21  $  0.42  $  0.41  
         
Net earnings per Class B Voting Common Share:        
Basic $  0.08  $  0.50  $  0.57  $  0.93  
Diluted $  0.08  $  0.49  $  0.56  $  0.91  
Dividends$  0.21  $  0.21  $  0.40  $  0.39  
         
Weighted average common shares outstanding (in thousands):        
Basic  51,698    51,054    51,569    50,844  
Diluted  52,719    51,954    52,551    51,721  
         

 

    
BRADY CORPORATION AND SUBSIDIARIES   
CONSOLIDATED BALANCE SHEETS   
(Unaudited; Dollars in thousands)   
    
 January 31, 2018 July 31, 2017
ASSETS   
Current assets:   
Cash and cash equivalents$  115,327  $  133,944 
Accounts receivable—net  164,400    149,638 
Inventories:   
    Finished products  72,629    69,760 
    Work-in-process  19,472    18,117 
    Raw materials and supplies  21,344    19,147 
        Total inventories  113,445    107,024 
Prepaid expenses and other current assets  20,950    17,208 
Total current assets  414,122    407,814 
Other assets:   
Goodwill  443,873    437,697 
Other intangible assets  50,131    53,076 
Deferred income taxes  9,899    35,456 
Other  18,579    18,077 
Property, plant and equipment:   
Cost:   
    Land  7,535    7,470 
    Buildings and improvements  98,256    98,228 
    Machinery and equipment  265,640    261,192 
    Construction in progress  6,176    4,109 
   377,607    370,999 
Less accumulated depreciation  279,826    272,896 
    Property, plant and equipment—net  97,781    98,103 
Total$  1,034,385  $  1,050,223 
LIABILITIES AND STOCKHOLDERS’ INVESTMENT   
Current liabilities:   
Notes payable$  585  $  3,228 
Accounts payable  64,365    66,817 
Wages and amounts withheld from employees  49,679    58,192 
Taxes, other than income taxes  7,997    7,970 
Accrued income taxes  6,085    7,373 
Other current liabilities  42,961    43,618 
    Total current liabilities  171,672    187,198 
Long-term obligations  70,615    104,536 
Other liabilities  60,125    58,349 
    Total liabilities  302,412    350,083 
Stockholders’ investment:   
Common stock:   
    Class A nonvoting common stock—Issued 51,261,487 and 51,261,487 shares,
    respectively, and outstanding 48,238,412 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  325,733    322,608 
Earnings retained in the business  515,872    507,136 
Treasury stock—3,023,075 and 3,446,669 shares, respectively, of Class A nonvoting
common stock, at cost
  (75,090)   (85,470)
Accumulated other comprehensive loss  (35,090)   (44,682)
    Total stockholders’ investment  731,973    700,140 
Total$  1,034,385  $  1,050,223 
    

 

     
BRADY CORPORATION AND SUBSIDIARIES    
CONSOLIDATED STATEMENTS OF CASH FLOWS    
(Unaudited; Dollars in thousands)    
 Six months ended January 31, 
 2018 2017 
Operating activities:    
Net earnings$  30,109  $  47,850  
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization  12,840    14,102  
Non-cash portion of stock-based compensation expense  5,897    5,394  
Deferred income taxes  26,028    (4,547) 
Changes in operating assets and liabilities:    
    Accounts receivable  (10,945)   3,407  
    Inventories  (4,150)   224  
    Prepaid expenses and other assets  (3,153)   220  
    Accounts payable and other liabilities  (12,695)   (9,384) 
    Income taxes  (1,471)   (3,932) 
        Net cash provided by operating activities  42,460    53,334  
     
Investing activities:    
Purchases of property, plant and equipment  (8,469)   (7,235) 
Other  (729)   593  
        Net cash used in investing activities  (9,198)   (6,642) 
     
Financing activities:    
Payment of dividends  (21,373)   (20,852) 
Proceeds from exercise of stock options  9,948    14,659  
Proceeds from borrowing on credit facilities  17,439    144,533  
Repayment of borrowing on credit facilities  (57,314)   (195,002) 
Income tax on equity-based compensation, and other  (2,342)   (640) 
        Net cash used in financing activities  (53,642)   (57,302) 
     
Effect of exchange rate changes on cash  1,763    (5,410) 
     
Net decrease in cash and cash equivalents  (18,617)   (16,020) 
Cash and cash equivalents, beginning of period  133,944    141,228  
     
Cash and cash equivalents, end of period$  115,327  $  125,208  
     

 

         
BRADY CORPORATION AND SUBSIDIARIES        
SEGMENT INFORMATION        
(Unaudited; Dollars in thousands)        
         
 Three Months Ended January 31, Six Months Ended January 31, 
 2018 2017 2018 2017 
SALES TO EXTERNAL CUSTOMERS        
ID Solutions$  206,432  $  190,962  $  416,137  $  392,226  
Workplace Safety   81,348     77,039     161,794     155,951  
Total$  287,780  $  268,001  $  577,931  $  548,177  
         
SALES INFORMATION        
ID Solutions        
Organic 4.7%  1.9%  3.8%  1.3% 
Currency 3.4%  (1.3)%  2.3%  (0.9)% 
Total 8.1%  0.6%  6.1%  0.4% 
Workplace Safety        
Organic (0.5)%  (0.2)%  (1.0)%  (1.3)% 
Currency 6.1%  (2.1)%  4.7%  (1.8)% 
Total 5.6%  (2.3)%  3.7%  (3.1)% 
Total Company        
Organic  3.2%  1.3%  2.4%  0.5% 
Currency 4.2%  (1.5)%  3.0%  (1.1)% 
Total 7.4%  (0.2)%  5.4%  (0.6)% 
         
SEGMENT PROFIT        
ID Solutions$  34,088  $  28,961  $  69,925  $  62,035  
Workplace Safety   7,055     6,059     13,500     12,504  
Total$  41,143  $  35,020  $  83,425  $  74,539  
SEGMENT PROFIT AS A PERCENT OF SALES        
ID Solutions 16.5%  15.2%  16.8%  15.8% 
Workplace Safety 8.7%  7.9%  8.3%  8.0% 
Total 14.3%  13.1%  14.4%  13.6% 
         
         
 Three Months Ended January 31, Six Months Ended January 31, 
 2018 2017 2018 2017 
Total segment profit$  41,143  $  35,020  $  83,425  $  74,539  
Unallocated amounts:        
Administrative costs   (6,347)    (5,058)    (13,218)    (11,369) 
Investment and other income   1,056     596     1,272     107  
Interest expense   (829)    (1,458)    (1,692)    (3,190) 
Earnings before income taxes$  35,023  $  29,100  $  69,787  $  60,087  
         

For More Information:
Investor contact:  Ann Thornton 414-438-6887
Media contact:  Kate Venne 414-358-5176