Brady Corporation Reports its Fiscal 2018 Fourth Quarter Results and Announces its Fiscal 2019 EPS Guidance

  • Earnings before income taxes increased 26.0 percent, finishing at $45.2 million in the fourth quarter of fiscal 2018 compared to $35.9 million in 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.  This marks the twelfth consecutive quarter of pre-tax earnings growth.
  • Earnings per diluted Class A Nonvoting Common Share were $0.66 in the fourth quarter of fiscal 2018 compared to $0.48 in the same quarter of the prior year.  The sale of the Runelandhs business contributed approximately $0.09 per diluted Class A Nonvoting Common Share.
  • Total revenues increased 2.9 percent, which consisted of organic revenue growth of 2.5 percent and an increase of 1.0 percent from foreign currency translation, partially offset by a decrease of 0.6 percent from the sale of the Runelandhs business.  This is our fifth consecutive quarter of organic revenue growth.
  • Earnings per diluted Class A Common Share guidance for the full year ending July 31, 2019 announced at a range of $2.15 to $2.25.

MILWAUKEE, Sept. 13, 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 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 414-438-6887
Media contact:  Kate Venne 414-358-5176

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