Brady Corporation Reports Fiscal 2019 First Quarter Results and Increases its Fiscal 2019 EPS Guidance

  • Organic revenues increased 4.7 percent in the first quarter of fiscal 2019.
  • Earnings before income taxes increased 14.8 percent to $39.9 million in the first quarter of fiscal 2019 compared to $34.8 million in the same quarter of the prior year.
  • Diluted EPS increased 18.4 percent to $0.58 in the first quarter of fiscal 2019 compared to $0.49 in the same quarter of the prior year.
  • Diluted EPS guidance for the full year ending July 31, 2019 was increased to a range of $2.20 to $2.30 from the previous range of $2.15 to $2.25.

MILWAUKEE, Nov. 15, 2018 (GLOBE NEWSWIRE) -- Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2019 first quarter ended October 31, 2018. 

Quarter Ended October 31, 2018 Financial Results:

Earnings before income taxes increased 14.8 percent to $39.9 million for the quarter ended October 31, 2018, compared to $34.8 million in the same quarter last year.

Net earnings for the quarter ended October 31, 2018, were $30.6 million compared to $25.8 million in the same quarter last year.

Net earnings per diluted Class A Nonvoting Common Share were $0.58 for the first quarter of fiscal 2019, compared to $0.49 in the same quarter last year.

Sales for the quarter ended October 31, 2018 increased 1.0 percent, which consisted of organic sales growth of 4.7 percent, a decrease in sales of 2.0 percent from foreign currency translation, and a decrease in sales of 1.7 percent from the divestiture of a business in the fourth quarter of fiscal 2018. Sales for the quarter ended October 31, 2018 were $293.2 million compared to $290.2 million in the same quarter last year. By segment, sales increased 4.0 percent in Identification Solutions and decreased 6.6 percent in Workplace Safety, which consisted of organic sales growth of 5.7 percent in Identification Solutions and organic sales growth of 2.2 percent in Workplace Safety.

Commentary:

“Our investments to increase organic sales growth through the development of innovative new products and to provide increased value to our customers is paying off as we reported 4.7 percent organic growth this quarter, which marks our sixth consecutive quarter of organic sales growth,” said Brady’s President and Chief Executive Officer, J. Michael Nauman. “This quarter also represents our thirteenth consecutive quarter of year-over-year pre-tax earnings growth. We apply a consistent and balanced approach to generating organic sales growth while driving sustainable efficiency gains throughout our global operations and SG&A structure. We expect this positive organic sales trend to continue as we invest in new product development in our global businesses and as our Workplace Safety business returns to consistent organic sales growth.”

“We used our cash generation this quarter to increase our investments in research and development and capability-enhancing capital expenditures while returning funds to our shareholders through dividends and further strengthening our balance sheet. We finished in a net cash position of $137.8 million as of October 31, 2018,” said Brady’s Chief Financial Officer, Aaron Pearce. “We’re experiencing increased costs in certain areas, making our focus on driving efficiency improvements and making investments in equipment and machinery to increase automation our top operational priorities. Our balance sheet provides significant flexibility for ongoing investments in growth opportunities to drive long-term shareholder value.”

Fiscal 2019 Guidance:

The Company is increasing its full year fiscal 2019 earnings per diluted Class A Nonvoting Common Share guidance from its previous range of $2.15 to $2.25 to a range of $2.20 to $2.30. Included in this guidance is organic sales growth of 3.0 percent to 5.0 percent, 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. This guidance is based upon foreign currency exchange rates as of October 31, 2018.

A webcast regarding Brady’s fiscal 2019 first 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 October 31,
  2018   2017 
Net sales$293,196  $290,151 
Cost of products sold 146,657   144,086 
Gross margin 146,539   146,065 
Operating expenses:   
Research and development 11,326   10,520 
Selling, general and administrative 94,591   100,134 
Total operating expenses 105,917   110,654 
    
Operating income 40,622   35,411 
    
Other (expense) income:   
Investment and other (expense) income (17)  216 
Interest expense (712)  (863)
    
Earnings before income taxes 39,893   34,764 
    
Income tax expense 9,256   8,928 
    
Net earnings$30,637  $25,836 
    
Net earnings per Class A Nonvoting Common Share:   
Basic$0.59  $0.50 
Diluted$0.58  $0.49 
Dividends$0.21  $0.21 
    
Net earnings per Class B Voting Common Share:   
Basic$0.57  $0.49 
Diluted$0.56  $0.48 
Dividends$0.20  $0.19 
    
Weighted average common shares outstanding (in thousands):   
Basic 52,201   51,440 
Diluted 52,958   52,383 


BRADY CORPORATION AND SUBSIDIARIES   
CONSOLIDATED BALANCE SHEETS   
(Dollars in thousands)   
    
 October 31, 2018 July 31, 2018
 (Unaudited)  
ASSETS   
Current assets:   
Cash and cash equivalents$192,176  $181,427 
Accounts receivable—net 169,327   161,282 
Inventories:   
Finished products 71,092   73,133 
Work-in-process 20,734   19,903 
Raw materials and supplies 22,190   20,035 
Total inventories 114,016   113,071 
Prepaid expenses and other current assets 18,497   15,559 
Total current assets 494,016   471,339 
Other assets:   
Goodwill 415,129   419,815 
Other intangible assets 41,033   42,588 
Deferred income taxes 7,770   7,582 
Other 17,621   17,662 
Property, plant and equipment:   
Cost:   
Land 7,250   6,994 
Buildings and improvements 95,386   96,245 
Machinery and equipment 270,192   270,989 
Construction in progress 7,492   4,495 
  380,320   378,723 
Less accumulated depreciation 282,263   280,778 
Property, plant and equipment—net 98,057   97,945 
Total$1,073,626  $1,056,931 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable$64,735  $66,538 
Wages and amounts withheld from employees 48,945   67,619 
Taxes, other than income taxes 8,377   8,318 
Accrued income taxes 4,937   3,885 
Other current liabilities 54,582   44,567 
Total current liabilities 181,576   190,927 
Long-term obligations 54,408   52,618 
Other liabilities 64,699   61,274 
Total liabilities 300,683   304,819 
Stockholders’ equity:   
Common stock:   
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 48,918,974 and 48,383,617 shares, respectively 513   513 
Class B voting common stock—Issued and outstanding, 3,538,628 shares 35   35 
Additional paid-in capital 326,182   325,631 
Retained earnings 570,858   553,454 
Treasury stock—2,342,513 and 2,867,870 shares, respectively, of Class A nonvoting common stock, at cost (58,414)  (71,120)
Accumulated other comprehensive loss (66,231)  (56,401)
Total stockholders’ equity 772,943   752,112 
Total$1,073,626  $1,056,931 


BRADY CORPORATION AND SUBSIDIARIES   
CONSOLIDATED STATEMENTS OF CASH FLOWS   
(Unaudited; Dollars in thousands)   
 Three months ended October 31,
  2018   2017 
Operating activities:   
Net earnings$30,637  $25,836 
Adjustments to reconcile net earnings to net cash provided by operating activities:   
Depreciation and amortization 5,960   6,564 
Non-cash portion of stock-based compensation expense 4,965   3,744 
Deferred income taxes 2,164   (1,168)
Changes in operating assets and liabilities:   
Accounts receivable (6,709)  (4,807)
Inventories (3,125)  (3,571)
Prepaid expenses and other assets (2,197)  (2,005)
Accounts payable and other liabilities (14,070)  7,799 
Income taxes 1,193   2,327 
Net cash provided by operating activities 18,818   34,719 
    
Investing activities:   
Purchases of property, plant and equipment (6,009)  (3,802)
Other 337   974 
Net cash used in investing activities (5,672)  (2,828)
    
Financing activities:   
Payment of dividends (11,096)  (10,639)
Proceeds from exercise of stock options 12,138   3,249 
Proceeds from borrowing on credit facilities 5,737   10,901 
Repayment of borrowing on credit facilities (2,269)  (22,894)
Income tax on equity-based compensation, and other (3,846)  (2,280)
Net cash provided by (used in) financing activities 664   (21,663)
    
Effect of exchange rate changes on cash (3,061)  (1,935)
    
Net increase in cash and cash equivalents 10,749   8,293 
Cash and cash equivalents, beginning of period 181,427   133,944 
    
Cash and cash equivalents, end of period$192,176  $142,237 


BRADY CORPORATION AND SUBSIDIARIES   
SEGMENT INFORMATION   
(Unaudited; Dollars in thousands)   
    
 Three months ended October 31,
  2018   2017 
NET SALES   
ID Solutions$218,100  $209,705 
Workplace Safety 75,096   80,446 
Total$293,196  $290,151 
    
SALES INFORMATION   
ID Solutions   
Organic 5.7%  2.9%
Currency (1.7)%  1.3%
Total 4.0%  4.2%
Workplace Safety   
Organic 2.2%  (1.4)%
Currency (2.6)%  3.3%
Divestitures (6.2)%  %
Total (6.6)%  1.9%
Total Company   
Organic 4.7%  1.7%
Currency (2.0)%  1.9%
Divestitures (1.7)%  %
Total 1.0%  3.6%
    
SEGMENT PROFIT   
ID Solutions$41,562  $35,837 
Workplace Safety 5,541   6,445 
Total$47,103  $42,282 
SEGMENT PROFIT AS A PERCENT OF NET SALES   
ID Solutions 19.1%  17.1%
Workplace Safety 7.4%  8.0%
Total 16.1%  14.6%
    
    
 Three months ended October 31,
  2018   2017 
Total segment profit$47,103  $42,282 
Unallocated amounts:   
Administrative costs (6,481)  (6,871)
Investment and other (expense) income (17)  216 
Interest expense (712)  (863)
Earnings before income taxes$39,893  $34,764 
    

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

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