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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