Attached files
| file | filename |
|---|---|
| 8-K - 8-K - BRADY CORP | form8-kxearningsrelease103.htm |
| EX-99.2 - FIRST QUARTER FISCAL 2016 INFORMATIONAL SLIDES - BRADY CORP | f16q1conferencecallprese.htm |
EXHIBIT 99.1
For More Information:
Investor contact: Ann Thornton 414-438-6887
Media contact: Carole Herbstreit 414-438-6882
Brady Corporation Reports Fiscal 2016 First Quarter Results and Increases Share Buyback Program
• | GAAP net earnings of $18.7 million in the first quarter of fiscal 2016 compared to GAAP and non-GAAP earnings from continuing operations* of $15.5 million and $18.4 million, respectively, in the same quarter of the prior year. |
• | First quarter organic revenue decline of 2.2 percent. |
• | Earnings per diluted Class A Nonvoting Common Share of $0.37 in the first quarter of fiscal 2016 compared to GAAP and non-GAAP earnings from continuing operations per diluted Class A Nonvoting Common Share* of $0.30 and $0.36, respectively, in the same quarter of the prior year. |
• | Returned $16.2 million to shareholders through share repurchases and $10.2 million in the form of dividends. |
• | Net cash provided by operating activities was $30.4 million during the first quarter of fiscal 2016, compared to $18.6 million in the same quarter of the prior year. |
• | Share buyback program increased to a total share repurchase authorization of up to 2 million shares of the Company’s Class A Common Stock. |
MILWAUKEE (November 19, 2015)--Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2016 first quarter ended October 31, 2015.
Quarter Ended October 31, 2015 Financial Results:
Net earnings for the quarter ended October 31, 2015 were $18.7 million compared to earnings from continuing operations of $15.5 million in the same quarter last year. Non-GAAP earnings from continuing operations* were $18.4 million for the quarter ended October 31, 2014.
Earnings per diluted Class A Nonvoting Common Share were $0.37 for the first quarter ended October 31, 2015 compared to earnings from continuing operations per diluted Class A Nonvoting Common Share of $0.30 in the same quarter last year. Non-GAAP earnings from continuing operations per diluted Class A Nonvoting Common Share* were $0.36 for the quarter ended October 31, 2014.
Sales for the quarter ended October 31, 2015 decreased 8.8 percent to $283.1 million compared to $310.2 million in the first quarter of fiscal 2015. Total organic sales decreased 2.2 percent and foreign currency translation decreased sales by 6.6 percent. By segment, organic sales decreased 2.4 percent in Identification Solutions and decreased 1.7 percent in Workplace Safety.
Share Buyback Program:
On November 18, 2015, Brady’s Board of Directors authorized an increase in the Company’s share buyback program, authorizing the repurchase of up to a total of two million shares of the Company’s Class A Common Stock, inclusive of the shares in the existing share buyback program. The share buyback plan may be implemented from time to time on the open market or in privately negotiated transactions.
Commentary:
“We’re seeing positive gross margin and net earnings impacts from our activities to improve operational efficiencies. In addition, we’re making significant progress improving the overall buying experience for our customers, which as we’ve stated is a top priority for fiscal 2016,” said Brady’s President and Chief Executive Officer, J. Michael Nauman. “Organic sales declined in both business segments in the first quarter, and although we expect that our growth initiatives and slightly easier comparables will improve our year-over-year organic sales growth rate in the second half of the fiscal year, we ultimately expect organic sales growth to be challenged by macro-economic conditions in certain industrial markets and geographies, including North America. We will remain focused on enhancing efficiency and building an organization where local teams are empowered to own and are held accountable for their financial results, which will help us to successfully compete over the long term.”
“Our continuous drive to increase efficiency is offsetting the net earnings impact of our organic sales decline. We are seeing gross margin benefits from our activities to improve productivity and we are seeing steady improvements in selling, general and administrative expenses,” said Brady’s Chief Financial Officer, Aaron Pearce. “Our cash flow is strong. During the quarter ended October 31, 2015, we generated net cash from operating activities of $30.4 million, returned $10.2 million to our shareholders in the form of dividends, and repurchased 807,692 shares at an average price of $20 per share, all while maintaining our strong balance sheet with a conservative net debt-to-EBITDA ratio of 1.1 to 1.”
Fiscal 2016 Guidance:
The Company’s earnings per diluted Class A Nonvoting Common Share guidance for the year ending July 31, 2016 remains unchanged at $1.10 to $1.30. Included in this guidance is slightly down organic sales for the balance of fiscal 2016 which is reflective of economic challenges in certain industrial markets and geographies, including North America. Offsetting this weaker sales outlook are efficiency gains in the Company’s manufacturing facilities as well as increased efficiencies in selling, general, and administrative expenses. This guidance is based on exchange rates as of October 31, 2015, a full-year income tax rate in the upper 20 percent range, capital expenditures of approximately $25 million, and depreciation and amortization of up to approximately $40 million.
A webcast regarding Brady’s fiscal 2016 first 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, 2015, employed approximately 6,400 people in its worldwide businesses. Brady’s fiscal 2015 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.
* See accompanying notes for Non-GAAP measures.
###
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: implementation of the Workplace Safety strategy; Brady’s ability to develop and successfully market technologically advanced new products; risks associated with restructuring plans and maintaining acceptable operational service metrics; technology changes and potential security violations to the Company’s information technology systems; future competition; future financial performance of major markets Brady serves, which include, without limitation, telecommunications, hard disk drive, manufacturing, electrical, construction, laboratory, education, governmental, public utility, computer, healthcare and transportation; fluctuations in currency rates versus the U.S. dollar; risks associated with international operations; difficulties associated with exports; changes in the supply of, or price for, parts and components; increased price pressure from suppliers and customers; Brady’s ability to retain significant contracts and customers; risk associated with loss of key talent; risks associated with obtaining governmental approvals and maintaining regulatory compliance; risk associated with product liability claims; environmental, health and safety compliance costs and liabilities; potential write-offs of Brady’s substantial intangible assets; unforeseen tax consequences; risks associated with divestitures; risks associated with identifying, completing, and integrating acquisitions; risks associated with our ownership structure; Brady’s ability to maintain compliance with its debt covenants; increase in our level of debt; and 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, 2015.
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, | |||||||
2015 | 2014 | ||||||
Net sales | $ | 283,073 | $ | 310,240 | |||
Cost of products sold | 143,724 | 160,079 | |||||
Gross margin | 139,349 | 150,161 | |||||
Operating expenses: | |||||||
Research and development | 8,569 | 9,631 | |||||
Selling, general and administrative | 100,678 | 109,279 | |||||
Restructuring charges | — | 4,278 | |||||
Total operating expenses | 109,247 | 123,188 | |||||
Operating income | 30,102 | 26,973 | |||||
Other (expense) income: | |||||||
Investment and other (expense) income | (759 | ) | 323 | ||||
Interest expense | (2,151 | ) | (2,891 | ) | |||
Earnings from continuing operations before income taxes | 27,192 | 24,405 | |||||
Income tax expense | 8,489 | 8,906 | |||||
Earnings from continuing operations | $ | 18,703 | $ | 15,499 | |||
Loss from discontinued operations, net of income taxes | — | (1,915 | ) | ||||
Net earnings | $ | 18,703 | $ | 13,584 | |||
Earnings from continuing operations per Class A Nonvoting Common Share: | |||||||
Basic | $ | 0.37 | $ | 0.30 | |||
Diluted | $ | 0.37 | $ | 0.30 | |||
Earnings from continuing operations per Class B Voting Common Share: | |||||||
Basic | $ | 0.35 | $ | 0.29 | |||
Diluted | $ | 0.35 | $ | 0.29 | |||
Loss from discontinued operations per Class A Nonvoting Common Share: | |||||||
Basic | $ | — | $ | (0.03 | ) | ||
Diluted | $ | — | $ | (0.04 | ) | ||
Loss from discontinued operations per Class B Voting Common Share: | |||||||
Basic | $ | — | $ | (0.04 | ) | ||
Diluted | $ | — | $ | (0.04 | ) | ||
Net Earnings per Class A Nonvoting Common Share: | |||||||
Basic | $ | 0.37 | $ | 0.27 | |||
Diluted | $ | 0.37 | $ | 0.26 | |||
Dividends | $ | 0.20 | $ | 0.20 | |||
Net Earnings per Class B Voting Common Share: | |||||||
Basic | $ | 0.35 | $ | 0.25 | |||
Diluted | $ | 0.35 | $ | 0.25 | |||
Dividends | $ | 0.19 | $ | 0.18 | |||
Weighted average common shares outstanding (in thousands): | |||||||
Basic | 51,029 | 51,251 | |||||
Diluted | 51,089 | 51,313 | |||||
BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands)
October 31, 2015 | July 31, 2015 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 110,610 | $ | 114,492 | |||
Accounts receivable—net | 159,174 | 157,386 | |||||
Inventories: | |||||||
Finished products | 63,500 | 66,700 | |||||
Work-in-process | 17,458 | 16,958 | |||||
Raw materials and supplies | 21,059 | 20,849 | |||||
Total inventories | 102,017 | 104,507 | |||||
Prepaid expenses and other current assets | 35,407 | 32,197 | |||||
Total current assets | 407,208 | 408,582 | |||||
Other assets: | |||||||
Goodwill | 430,972 | 433,199 | |||||
Other intangible assets | 66,242 | 68,888 | |||||
Deferred income taxes | 20,811 | 22,310 | |||||
Other | 17,508 | 18,704 | |||||
Property, plant and equipment: | |||||||
Cost: | |||||||
Land | 5,097 | 5,284 | |||||
Buildings and improvements | 93,803 | 94,423 | |||||
Machinery and equipment | 257,602 | 270,086 | |||||
Construction in progress | 2,901 | 2,164 | |||||
359,403 | 371,957 | ||||||
Less accumulated depreciation | 253,295 | 260,743 | |||||
Property, plant and equipment—net | 106,108 | 111,214 | |||||
Total | $ | 1,048,849 | $ | 1,062,897 | |||
LIABILITIES AND STOCKHOLDERS’ INVESTMENT | |||||||
Current liabilities: | |||||||
Notes payable | $ | 9,173 | $ | 10,411 | |||
Accounts payable | 72,703 | 73,020 | |||||
Wages and amounts withheld from employees | 29,726 | 30,282 | |||||
Taxes, other than income taxes | 7,026 | 7,250 | |||||
Accrued income taxes | 9,609 | 7,576 | |||||
Other current liabilities | 41,723 | 38,194 | |||||
Current maturities on long-term debt | — | 42,514 | |||||
Total current liabilities | 169,960 | 209,247 | |||||
Long-term obligations, less current maturities | 241,434 | 200,774 | |||||
Other liabilities | 64,697 | 65,188 | |||||
Total liabilities | 476,091 | 475,209 | |||||
Stockholders’ investment: | |||||||
Common stock: | |||||||
Class A nonvoting common stock—Issued 51,261,487 and 51,261,487 shares, respectively and outstanding 47,040,129 and 47,781,184 shares, respectively | 513 | 513 | |||||
Class B voting common stock—Issued and outstanding, 3,538,628 shares | 35 | 35 | |||||
Additional paid-in capital | 313,879 | 314,403 | |||||
Earnings retained in the business | 422,589 | 414,069 | |||||
Treasury stock—4,221,358 and 3,480,303 shares, respectively of Class A nonvoting common stock, at cost | (107,420 | ) | (93,234 | ) | |||
Accumulated other comprehensive loss | (53,426 | ) | (45,034 | ) | |||
Other | (3,412 | ) | (3,064 | ) | |||
Total stockholders’ investment | 572,758 | 587,688 | |||||
Total | $ | 1,048,849 | $ | 1,062,897 | |||
BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)
Three months ended October 31, | |||||||
2015 | 2014 | ||||||
Operating activities: | |||||||
Net earnings | $ | 18,703 | $ | 13,584 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 8,889 | 10,123 | |||||
Non-cash portion of stock-based compensation expense | 2,596 | 1,319 | |||||
Non-cash portion of restructuring charges | — | 196 | |||||
Loss on sale of business, net | — | 426 | |||||
Deferred income taxes | 726 | 2,346 | |||||
Changes in operating assets and liabilities (net of effects of business acquisitions/divestitures): | |||||||
Accounts receivable | (3,342 | ) | (3,916 | ) | |||
Inventories | 1,368 | (7,077 | ) | ||||
Prepaid expenses and other assets | (3,081 | ) | (2,999 | ) | |||
Accounts payable and accrued liabilities | 2,402 | 2,897 | |||||
Income taxes | 2,109 | 1,705 | |||||
Net cash provided by operating activities | 30,370 | 18,604 | |||||
Investing activities: | |||||||
Purchases of property, plant and equipment | (2,334 | ) | (11,451 | ) | |||
Sale of business, net of cash retained | — | 8,771 | |||||
Other | 1,539 | 592 | |||||
Net cash used in investing activities | (795 | ) | (2,088 | ) | |||
Financing activities: | |||||||
Payment of dividends | (10,183 | ) | (10,191 | ) | |||
Proceeds from issuance of common stock | — | 91 | |||||
Purchase of treasury stock | (16,160 | ) | — | ||||
Net (repayments) proceeds from borrowings on credit facilities | (2,738 | ) | 33,286 | ||||
Debt issuance costs | (803 | ) | — | ||||
Income tax on equity-based compensation, and other | (1,007 | ) | (1,296 | ) | |||
Net cash (used in) provided by financing activities | (30,891 | ) | 21,890 | ||||
Effect of exchange rate changes on cash | (2,566 | ) | (3,766 | ) | |||
Net (decrease) increase in cash and cash equivalents | (3,882 | ) | 34,640 | ||||
Cash and cash equivalents, beginning of period | 114,492 | 81,834 | |||||
Cash and cash equivalents, end of period | $ | 110,610 | $ | 116,474 | |||
Supplemental disclosures: | |||||||
Cash paid during the period for: | |||||||
Interest | $ | 2,144 | $ | 3,032 | |||
Income taxes, net of refunds | 4,533 | 7,323 | |||||
BRADY CORPORATION AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited; Dollars in thousands)
Three months ended October 31, | |||||||
2015 | 2014 | ||||||
SALES TO EXTERNAL CUSTOMERS | |||||||
ID Solutions | $ | 196,327 | $ | 212,097 | |||
Workplace Safety | 86,746 | 98,143 | |||||
Total Company | $ | 283,073 | $ | 310,240 | |||
SALES INFORMATION | |||||||
ID Solutions | |||||||
Organic | (2.4 | )% | 2.4 | % | |||
Currency | (5.0 | )% | (1.2 | )% | |||
Total | (7.4 | )% | 1.2 | % | |||
Workplace Safety | |||||||
Organic | (1.7 | )% | 2.4 | % | |||
Currency | (9.9 | )% | (2.2 | )% | |||
Total | (11.6 | )% | 0.2 | % | |||
Total Company | |||||||
Organic | (2.2 | )% | 2.4 | % | |||
Currency | (6.6 | )% | (1.5 | )% | |||
Total | (8.8 | )% | 0.9 | % | |||
SEGMENT PROFIT | |||||||
ID Solutions | $ | 40,004 | $ | 43,467 | |||
Workplace Safety | 16,664 | 15,539 | |||||
Total | $ | 56,668 | $ | 59,006 | |||
SEGMENT PROFIT AS A PERCENT OF SALES | |||||||
ID Solutions | 20.4 | % | 20.5 | % | |||
Workplace Safety | 19.2 | % | 15.8 | % | |||
Total | 20.0 | % | 19.0 | % | |||
Three months ended October 31, | |||||||
2015 | 2014 | ||||||
Total segment profit | $ | 56,668 | $ | 59,006 | |||
Unallocated amounts: | |||||||
Administrative costs | (26,566 | ) | (27,755 | ) | |||
Restructuring charges | — | (4,278 | ) | ||||
Investment and other (expense) income | (759 | ) | 323 | ||||
Interest expense | (2,151 | ) | (2,891 | ) | |||
Earnings from continuing operations before income taxes | $ | 27,192 | $ | 24,405 | |||
NON-GAAP MEASURES
(Unaudited; Dollars in Thousands, Except Per Share Amounts)
In accordance with the U.S. Securities and Exchange Commission’s Regulation G, the following provides definitions of the Non-GAAP measures used in the earnings release and the reconciliation to the most closely related GAAP measure. | |||||||||||||
Earnings from Continuing Operations Before Income Taxes Excluding Certain Items: | |||||||||||||||||
Brady is presenting the Non-GAAP measure "Earnings from Continuing Operations Before Income Taxes Excluding Certain Items." This is not a calculation based upon GAAP. The amounts included in this Non-GAAP measure are derived from amounts included in the Condensed Consolidated Financial Statements and supporting footnote disclosures. We do not view these items to be part of our sustainable results. We believe this profit measure provides an important perspective of underlying business trends and results and provides a more comparable measure from year to year. The table below provides a reconciliation of Earnings from Continuing Operations Before Income Taxes to Earnings from Continuing Operations Before Income Taxes Excluding Certain Items: | |||||||||||||||||
Three months ended October 31, | |||||||||||||||||
2015 | 2014 | ||||||||||||||||
Earnings from Continuing Operations Before Income Taxes (GAAP measure) | $ | 27,192 | $ | 24,405 | |||||||||||||
Restructuring charges | — | 4,278 | |||||||||||||||
Earnings from Continuing Operations Before Income Taxes Excluding Certain Items (non-GAAP measure) | $ | 27,192 | $ | 28,683 | |||||||||||||
Income Taxes on Continuing Operations Excluding Certain Items: | |||||||||||||||||
Brady is presenting the Non-GAAP measure "Income Taxes on Continuing Operations Excluding Certain Items." This is not a calculation based upon GAAP. The amounts included in this Non-GAAP measure are derived from amounts included in the Condensed Consolidated Financial Statements and supporting footnote disclosures. We do not view these items to be part of our sustainable results. We believe this measure provides an important perspective of underlying business trends and results and provides a more comparable measure from year to year. The table below provides a reconciliation of Income Taxes on Continuing Operations to Income Taxes on Continuing Operations Excluding Certain Items: | |||||||||||||||||
Three months ended October 31, | |||||||||||||||||
2015 | 2014 | ||||||||||||||||
Income Taxes on Continuing Operations (GAAP measure) | $ | 8,489 | $ | 8,906 | |||||||||||||
Restructuring charges | — | 1,331 | |||||||||||||||
Income Taxes on Continuing Operations Excluding Certain Items (non-GAAP measure) | $ | 8,489 | $ | 10,237 | |||||||||||||
Net Earnings from Continuing Operations Excluding Certain Items: | |||||||||||||||||
Brady is presenting the Non-GAAP measure "Net Earnings from Continuing Operations Excluding Certain Items." This is not a calculation based upon GAAP. The amounts included in this Non-GAAP measure are derived from amounts included in the Condensed Consolidated Financial Statements and supporting footnote disclosures. We do not view these items to be part of our sustainable results. We believe this measure provides an important perspective of underlying business trends and results and provides a more comparable measure from year to year. The table below provides a reconciliation of Net Earnings from Continuing Operations to Net Earnings from Continuing Operations Excluding Certain Items: | |||||||||||||||||
Three months ended October 31, | |||||||||||||||||
2015 | 2014 | ||||||||||||||||
Net Earnings from Continuing Operations (GAAP measure) | $ | 18,703 | $ | 15,499 | |||||||||||||
Restructuring charges | — | 2,947 | |||||||||||||||
Net Earnings from Continuing Operations Excluding Certain Items (non-GAAP measure) | $ | 18,703 | $ | 18,446 | |||||||||||||
Net Earnings from Continuing Operations Per Diluted Class A Nonvoting Common Share Excluding Certain Items: | |||||||||||||||||
Brady is presenting the Non-GAAP measure "Net Earnings from Continuing Operations Per Diluted Class A Nonvoting Common Share Excluding Certain Items." This is not a calculation based upon GAAP. The amounts included in this Non-GAAP measure are derived from amounts included in the Condensed Consolidated Financial Statements. We do not view these items to be part of our sustainable results. We believe this measure provides an important perspective of underlying business trends and results and provides a more comparable measure from year to year. The table below provides a reconciliation of Net Earnings from Continuing Operations Per Diluted Class A Nonvoting Common Share to Net Earnings from Continuing Operations Per Diluted Class A Nonvoting Common Share Excluding Certain Items: | |||||||||||||||||
Three months ended October 31, | |||||||||||||||||
2015 | 2014 | ||||||||||||||||
Net Earnings from Continuing Operations Per Diluted Class A Nonvoting Common Share (GAAP measure) | $ | 0.37 | $ | 0.30 | |||||||||||||
Restructuring charges | — | 0.06 | |||||||||||||||
Net Earnings from Continuing Operations Per Diluted Class A Nonvoting Common Share Excluding Certain Items (non-GAAP measure) | $ | 0.37 | $ | 0.36 | |||||||||||||