BRADY CORP - FORM 8-K - EX-99.1 - THIRD QUARTER FISCAL 2017 PRESS RELEASE - May 25, 2017

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EXHIBIT 99.1

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


Brady Corporation Reports Fiscal 2017 Third Quarter Results and Tightens its Fiscal 2017 EPS Guidance

•
Earnings per diluted Class A Nonvoting Common Share were $0.43 in the third quarter of fiscal 2017 compared to $0.42 in the same quarter of the prior year.
•
Organic revenue declined 1.9 percent for the quarter ended April 30, 2017.
•
Net debt was $8.9 million at April 30, 2017 compared to $100.9 million at April 30, 2016, providing flexibility for future investments.
•
Earnings per diluted Class A Common Share guidance for the full year ending July 31, 2017 tightened from a range of $1.75 to $1.85 to a range of $1.80 to $1.85.

MILWAUKEE (May 25, 2017)--Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2017 third quarter ended April 30, 2017.

Quarter Ended April 30, 2017 Financial Results:
Net earnings for the quarter ended April 30, 2017, were $22.6 million compared to $21.0 million in the same quarter last year.
Earnings per diluted Class A Nonvoting Common Share were $0.43 for the quarter ended April 30, 2017, compared to $0.42 in the same quarter last year.
Sales for the quarter ended April 30, 2017, decreased 3.8 percent to $275.9 million compared to $286.8 million in the same quarter last year. Total organic sales decreased 1.9 percent and the impact of foreign currency translation decreased sales by 1.9 percent. By segment, organic sales decreased 0.8 percent in Identification Solutions and decreased 4.6 percent in Workplace Safety.

Nine-Month Period Ended April 30, 2017 Financial Results:
Net earnings for the nine-month period ended April 30, 2017, were $70.4 million compared to $55.0 million in the same period last year.
Earnings per diluted Class A Nonvoting Common Share were $1.36 for the nine-month period ended April 30, 2017, compared to $1.08 in the same period last year.
Sales for the nine-month period ended April 30, 2017, decreased 1.7 percent to $824.1 million compared to $838.5 million in the same period last year. Total organic sales decreased 0.3 percent and foreign currency translation decreased sales by 1.4 percent. By segment, organic sales increased 0.6 percent in Identification Solutions and decreased 2.5 percent in Workplace Safety.





Commentary:
“Our consistent focus on developing high-quality products, providing excellent customer service, pushing for efficiencies throughout our SG&A structure, and empowering the Brady team with local ownership and accountability are the primary drivers of our improved financial results. This quarter marks our seventh consecutive quarter of year-over-year earnings growth,” said Brady’s President and Chief Executive Officer, J. Michael Nauman. “We believe that our focus on driving efficiencies combined with our organic sales initiatives and our new product pipeline is beginning to generate improved organic sales trends, and will continue to drive future profit improvements. That said, challenges in the distribution channel will impact our Workplace Safety business while we are more optimistic about growth in the fourth quarter in Identification Solutions. Looking forward, our priorities remain unchanged, which are to grow our pipeline of innovative new products, provide excellent customer service and deliver operational efficiencies. We are pleased with our ability to improve our financial performance while maintaining our focus on our long-term strategy.”
“Third quarter revenues were approximately in line with our expectations coming into the quarter, finishing with an organic sales decline of 1.9 percent. Our third quarter was impacted by fewer billing days compared to the same quarter in the prior year. Organic sales were up 0.7% on a per day basis. Our ability to drive operational efficiencies and actively reduce our general and administrative structure provided financial benefits this quarter,” said Brady’s Chief Financial Officer, Aaron Pearce. “Cash generation for the quarter ended April 30, 2017 continued to be strong, as we finished with net cash provided by operating activities of $37.8 million while reducing our net debt by $28.8 million this quarter. Our strong balance sheet provides significant flexibility for future investments in new products and returning funds to our shareholders.”

Fiscal 2017 Guidance:
The Company is tightening its earnings per diluted Class A Common Share guidance from a range of $1.75 to $1.85 to a range of $1.80 to $1.85 for the full year ending July 31, 2017. Included in this guidance are organic sales ranging from a low single-digit decline to slightly positive growth for the year ending July 31, 2017. Offsetting this challenging revenue environment are ongoing efficiency gains in the Company’s manufacturing facilities and selling, general, and administrative expenses. This guidance is based upon foreign currency exchange rates as of April 30, 2017, a full-year income tax rate in the mid-20 percent range, depreciation and amortization expense of $28 million, and capital expenditures approximating $17 million.

A webcast regarding Brady’s fiscal 2017 third 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, 2016, employed approximately 6,500 people in its worldwide businesses. Brady’s fiscal 2016 sales were approximately $1.12 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 April 30,
 
Nine months ended April 30,
 
2017
 
2016
 
2017
 
2016
Net sales
$
275,927

 
$
286,816

 
$
824,104

 
$
838,519

Cost of products sold
136,018

 
141,373

 
409,679

 
420,835

Gross margin
139,909

 
145,443

 
414,425

 
417,684

Operating expenses:
 
 
 
 
 
 
 
Research and development
9,950

 
8,865

 
28,577

 
26,531

Selling, general and administrative
98,409

 
105,794

 
291,128

 
306,678

Total operating expenses
108,359

 
114,659

 
319,705

 
333,209

 
 
 
 
 
 
 
 
Operating income
31,550

 
30,784

 
94,720

 
84,475

 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
Investment and other income (expense)
453

 
721

 
560

 
(1,030
)
Interest expense
(1,375
)
 
(1,838
)
 
(4,565
)
 
(6,119
)
 
 
 
 
 
 
 
 
Earnings before income taxes
30,628

 
29,667

 
90,715

 
77,326

 
 
 
 
 
 
 
 
Income tax expense
8,075

 
8,686

 
20,312

 
22,352

 
 
 
 
 
 
 
 
Net earnings
$
22,553

 
$
20,981

 
$
70,403

 
$
54,974

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings per Class A Nonvoting Common Share:
 
 
 
 
 
 
 
Basic
$
0.44

 
$
0.42

 
$
1.38

 
$
1.09

Diluted
$
0.43

 
$
0.42

 
$
1.36

 
$
1.08

Dividends
$
0.21

 
$
0.20

 
$
0.62

 
$
0.61

 
 
 
 
 
 
 
 
Net earnings per Class B Voting Common Share:
 
 
 
 
 
 
 
Basic
$
0.44

 
$
0.42

 
$
1.37

 
$
1.07

Diluted
$
0.43

 
$
0.42

 
$
1.34

 
$
1.07

Dividends
$
0.21

 
$
0.20

 
$
0.60

 
$
0.59

 
 
 
 
 
 
 
 
Weighted average common shares outstanding (in thousands):
 
 
 
 
 
 
 
Basic
51,227

 
50,251

 
50,972

 
50,602

Diluted
52,201

 
50,505

 
51,882

 
50,747





BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands)
 
April 30, 2017
 
July 31, 2016
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
129,077

 
$
141,228

Accounts receivable—net
145,755

 
147,333

Inventories:
 
 
 
Finished products
61,025

 
64,313

Work-in-process
17,326

 
16,678

Raw materials and supplies
19,126

 
18,436

Total inventories
97,477

 
99,427

Prepaid expenses and other current assets
20,343

 
19,436

Total current assets
392,652

 
407,424

Other assets:
 
 
 
Goodwill
425,935

 
429,871

Other intangible assets
54,107

 
59,806

Deferred income taxes
26,228

 
27,238

Other
18,152

 
17,181

Property, plant and equipment:
 
 
 
Cost:
 
 
 
Land
7,271

 
5,809

Buildings and improvements
95,662

 
95,355

Machinery and equipment
257,465

 
256,549

Construction in progress
4,362

 
2,842

 
364,760

 
360,555

Less accumulated depreciation
268,586

 
258,111

Property, plant and equipment—net
96,174

 
102,444

Total
$
1,013,248

 
$
1,043,964

LIABILITIES AND STOCKHOLDERS’ INVESTMENT
 
 
 
Current liabilities:
 
 
 
Notes payable
$
4,072

 
$
4,928

Accounts payable
60,144

 
62,245

Wages and amounts withheld from employees
45,079

 
45,998

Taxes, other than income taxes
7,109

 
7,403

Accrued income taxes
2,706

 
6,136

Other current liabilities
39,022

 
40,017

Total current liabilities
158,132

 
166,727

Long-term obligations, less current maturities
133,894

 
211,982

Other liabilities
57,159

 
61,657

Total liabilities
349,185

 
440,366

Stockholders’ investment:
 
 
 
Common Stock:
 
 
 
Class A nonvoting common stock—Issued 51,261,487 and 51,261,487 shares, respectively and outstanding 47,738,671 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
321,936

 
317,001

Earnings retained in the business
492,411

 
453,371

Treasury stock—3,522,816 and 4,340,513 shares, respectively of Class A nonvoting common stock, at cost
(87,493
)
 
(108,714
)
Accumulated other comprehensive loss
(63,339
)
 
(54,745
)
Other
—

 
(3,863
)
Total stockholders’ investment
664,063

 
603,598

Total
$
1,013,248

 
$
1,043,964






BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)
 
Nine months ended April 30,
 
2017
 
2016
Operating activities:
 
 
 
Net earnings
$
70,403

 
$
54,974

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
20,789

 
24,896

Stock-based compensation expense
7,445

 
6,247

Deferred income taxes
(2,707
)
 
3,169

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(931
)
 
4,679

Inventories
666

 
4,556

Prepaid expenses and other assets
(1,987
)
 
(734
)
Accounts payable and accrued liabilities
754

 
3,432

Income taxes
(3,270
)
 
(2,669
)
Net cash provided by operating activities
91,162

 
98,550

 
 
 
 
Investing activities:
 
 
 
Purchases of property, plant and equipment
(10,856
)
 
(7,468
)
Other
38

 
1,987

Net cash used in investing activities
(10,818
)
 
(5,481
)
 
 
 
 
Financing activities:
 
 
 
Payment of dividends
(31,362
)
 
(30,603
)
Proceeds from exercise of stock options
18,674

 
663

Purchase of treasury stock
—

 
(23,552
)
(Repayments) proceeds from borrowing on credit facilities
(60,415
)
 
28,819

Principal payments on debt
(16,371
)
 
(42,514
)
Debt issuance costs
—


(803
)
Income tax on equity-based compensation, and other
(512
)
 
(1,238
)
Net cash used in financing activities
(89,986
)
 
(69,228
)
 
 
 
 
Effect of exchange rate changes on cash
(2,509
)
 
3,263

 
 
 
 
Net (decrease) increase in cash and cash equivalents
(12,151
)
 
27,104

Cash and cash equivalents, beginning of period
141,228

 
114,492

 
 
 
 
Cash and cash equivalents, end of period
$
129,077

 
$
141,596





BRADY CORPORATION AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited; Dollars in thousands)
 
Three months ended April 30,
 
Nine months ended April 30,
 
2017
 
2016
 
2017
 
2016
SALES TO EXTERNAL CUSTOMERS
 
 
 
 
 
 
 
ID Solutions
$
196,880

 
$
201,482

 
$
589,106

 
$
592,282

Workplace Safety
79,047

 
85,334

 
234,998

 
246,237

Total
$
275,927

 
$
286,816

 
$
824,104

 
$
838,519

 
 
 
 
 
 
 
 
SALES INFORMATION
 
 
 
 
 
 
 
ID Solutions
 
 
 
 
 
 
 
Organic
(0.8
)%
 
(0.9
)%
 
0.6
 %
 
(0.9
)%
Currency
(1.5
)%
 
(1.1
)%
 
(1.1
)%
 
(3.5
)%
Total
(2.3
)%
 
(2.0
)%
 
(0.5
)%
 
(4.4
)%
Workplace Safety
 
 
 
 
 
 
 
Organic
(4.6
)%
 
1.7
 %
 
(2.5
)%
 
(0.2
)%
Currency
(2.9
)%
 
(0.9
)%
 
(2.1
)%
 
(6.2
)%
Total
(7.5
)%
 
0.8
 %
 
(4.6
)%
 
(6.4
)%
Total Company
 
 
 
 
 
 
 
Organic
(1.9
)%
 
(0.1
)%
 
(0.3
)%
 
(0.7
)%
Currency
(1.9
)%
 
(1.1
)%
 
(1.4
)%
 
(4.3
)%
Total
(3.8
)%
 
(1.2
)%
 
(1.7
)%
 
(5.0
)%
 
 
 
 
 
 
 
 
SEGMENT PROFIT
 
 
 
 
 
 
 
ID Solutions
$
32,633

 
$
31,898

 
$
94,676

 
$
80,385

Workplace Safety
5,120

 
6,012

 
17,615

 
21,690

Total
$
37,753

 
$
37,910

 
$
112,291

 
$
102,075

SEGMENT PROFIT AS A PERCENT OF SALES
 
 
 
 
 
 
 
ID Solutions
16.6
 %
 
15.8
 %
 
16.1
 %
 
13.6
 %
Workplace Safety
6.5
 %
 
7.0
 %
 
7.5
 %
 
8.8
 %
Total
13.7
 %
 
13.2
 %
 
13.6
 %
 
12.2
 %

 
Three months ended April 30,
 
Nine months ended April 30,
 
2017
 
2016
 
2017
 
2016
Total segment profit
$
37,753

 
$
37,910

 
$
112,291

 
$
102,075

Unallocated amounts:
 
 
 
 
 
 
 
Administrative costs
(6,203
)
 
(7,126
)
 
(17,571
)
 
(17,600
)
Investment and other income (expense)
453

 
721

 
560

 
(1,030
)
Interest expense
(1,375
)
 
(1,838
)
 
(4,565
)
 
(6,119
)
Earnings before income taxes
$
30,628

 
$
29,667

 
$
90,715

 
$
77,326




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