Attached files
| file | filename |
|---|---|
| EX-99.2 - ADDITIONAL ANNOUNCEMENT - BRADY CORP | exhibit992-pressreleasediv.htm |
| EX-99.1 - FOURTH QUARTER FISCAL 2016 PRESS RELEASE - BRADY CORP | exhibit991-financials73116.htm |
| 8-K - 8-K - BRADY CORP | form8-kearningsreleasex731.htm |
September 9, 2016
Brady Corporation
F’16 Q4 Financial Results
2 Forward-Looking Statements
In this presentation, 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; 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 restructuring plans and
maintaining acceptable operational service metrics; 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.
3 Q4 F’16 Financial Summary
• Sales down 2.3% to $282.1M in Q4 of F’16 vs. $288.6M in Q4 of F’15.
– Organic sales decreased 0.9%. Foreign currency translation reduced sales by 1.4%.
• Gross profit margin of 50.0% in Q4 of F’16 compared with 44.7% in Q4 of F’15.
• SG&A expense of $98.4M (34.9% of sales) in Q4 of F’16 compared with $102.9M
(35.7% of sales) in Q4 of F’15.
• Net earnings of $25.1M in Q4 of F’16 compared with a GAAP loss from
continuing operations of $(39.4M) and non-GAAP earnings* of $14.4M in Q4 of
F’15.
• Net earnings per Class A Diluted Nonvoting Share of $0.49 in Q4 of F’16,
compared to a Net loss from continuing operations per Class A Diluted
Nonvoting Share of $(0.77) in Q4 of F’15 and non-GAAP Earnings per Share*
of $0.28 in Q4 of F’15.
• Net cash provided by operating activities of $40.4M in Q4 of F’16 compared
with $40.6M in Q4 of F’15.
• Non-GAAP earnings and non-GAAP Earnings per Share are non-GAAP measures. See appendix.
4 Sales Overview
• (0.9%) organic sales decline:
• ID Solutions – Organic sales decline of (0.2%).
• Workplace Safety – Organic sales decline of
(2.7%).
• (1.4%) decrease due to currency translation.
Q4 F’16 SALES:
• Our European businesses in both IDS and WPS
performed well, with continued organic sales growth in
Q4 and for the full year ended July 31, 2016.
• Challenges persist in the Americas and Australia
where organic sales declined vs. Q4 of F’15.
• Foreign currency translation headwinds persist.
Q4 F’16 SALES COMMENTARY:
$308
$291
$310
$317
$310
$283
$290 $289
$283
$269
$287
$282
$200
$225
$250
$275
$300
$325
Q1 F'14
(2.1%)
Q2 F'14
(1.1%)
Q3 F'14
2.5%
Q4 F'14
1.1%
Q1 F'15
2.4%
Q2 F'15
1.4%
Q3 F'15
1.7%
Q4 F'15
(1.2%)
Q1 F'16
(2.2%)
Q2 F'16
0.4%
Q3 F'16
(0.1%)
Q4 F'16
(0.9%)Organic Sales
Growth
SALES (millions of USD)
Gross Profit Margin 5
• GPM of 50.0% in Q4 of F’16 compared with 44.7% in Q4 of F’15 and 50.7% in Q3 of F’16.
• GPM in Q4 of F’15 was impacted by facility consolidation-related costs and other non-routine charges.
• On-going operational improvements are positively impacting profitability.
GROSS PROFIT MARGIN COMMENTARY:
$158
$143
$155 $154
$150
$138
$141
$129
$139
$133
$145
$141
51%
49%
50%
49% 48% 49% 49%
45%
49% 49%
51%
50%
25%
30%
35%
40%
45%
50%
$100
$125
$150
$175
Q1 F'14 Q2 F'14 Q3 F'14 Q4 F'14 Q1 F'15 Q2 F'15 Q3 F'15 Q4 F'15 Q1 F'16 Q2 F'16 Q3 F'16 Q4 F'16
GROSS PROFIT & GPM% (millions of USD)
SG&A Expense 6
• SG&A expense was down $4.5M to $98.4M in Q4 of F’16 compared to $102.9M in Q4 of F’15.
• Approximately half of the decline in SG&A expense was caused by the strengthening of the U.S. dollar against other
major currencies and the remaining half was due to efficiency gains.
SG&A EXPENSE:
$113 $111
$117
$111 $109 $108
$103 $103 $101 $100
$106
$98
37%
38%
38%
35% 35%
38%
35% 36% 36%
37% 37%
35%
20%
25%
30%
35%
40%
$50
$75
$100
$125
$150
Q1 F'14 Q2 F'14 Q3 F'14 Q4 F'14 Q1 F'15 Q2 F'15 Q3 F'15 Q4 F'15 Q1 F'16 Q2 F'16 Q3 F'16 Q4 F'16
SG&A and SG&A% of SALES (millions of USD)
7 Net Earnings & EPS
* Non-GAAP Net Earnings from Continuing Operations and Non-GAAP Net Earnings from Continuing Operations Per
Class A Diluted Nonvoting Share are non-GAAP measures. See appendix.
• Q4 F’16 net earnings were $25.1M compared to Non-
GAAP net earnings* of $14.4M in Q4 of F’15.
• Increase in earnings driven by improved gross profit
margins, efficiencies in operating expenses, and a
lower tax rate.
Q4 F’16 – NET EARNINGS:
• Q4 F’16 Diluted EPS was $0.49 compared to GAAP
EPS of $(0.77) and Non-GAAP EPS* of $0.28 in Q4 of
F’15.
• The income tax rate was 21.5% during the quarter
ended July 31, 2016. If the income tax rate
approximated our historical corporate average of 28%,
EPS would have been reduced by $0.04.
Q4 F’16 – EPS
$0.43
$0.25
$0.43 $0.41
$0.36
$0.29
$0.34
$0.28
$0.37
$0.30
$0.42
$0.49
$0.00
$0.20
$0.40
$0.60
Q1
F'14
Q2
F'14
Q3
F'14
Q4
F'14
Q1
F'15
Q2
F'15
Q3
F'15
Q4
F'15
Q1
F'16
Q2
F'16
Q3
F'16
Q4
F'16
NET EARNINGS FROM CONTINUING OPERATIONS PER CLASS
A DILUTED NONVOTING SHARE, EXCLUDING CERTAIN ITEMS*
$23
$13
$22 $21
$18
$15
$18
$14
$19
$15
$21
$25
$0
$10
$20
$30
$40
Q1
F'14
Q2
F'14
Q3
F'14
Q4
F'14
Q1
F'15
Q2
F'15
Q3
F'15
Q4
F'15
Q1
F'16
Q2
F'16
Q3
F'16
Q4
F'16
NET EARNINGS FROM CONTINUING OPERATIONS,
EXCLUDING CERTAIN ITEMS* (millions of USD)
8 Cash Generation & Uses
• Cash flow from operating activities was
$40.4M in Q4 of F’16 compared to
$40.6M in Q4 of F’15.
• Free cash flow* was $30.8M in Q4 of
F’16 compared to $37.5 in Q4 of F’15.
• Returned $10.2M to our shareholders in
the form of dividends in Q4 of F’16.
• Repaid $24.3M in debt in Q4 of F’16
compared to repayments of $13.6M in
Q4 of F’15.
CASH FLOWS IN Q4 OF F’16:
* Free Cash Flow is calculated as Net Cash Provided by
Operating Activities less Capital Expenditures.
$26
$5
$29
$41
$30
$28
$40 $40
$0
$10
$20
$30
$40
$50
Q1 F'15 Q2 F'15 Q3 F'15 Q4 F'15 Q1 F'16 Q2 F'16 Q3 F'16 Q4 F'16
Cash Flow from Operating Activities (millions of USD)
(millions of USD) 3 Mos. Ended
Jul. 31, 2016
3 Mos. Ended
Jul. 31, 2015
Cash Balance - Beginning of Period 141.6$ 100.5$
Cash Flow from Operating Activities 40.4 40.6
Capital Expenditures (9.7) (3.1)
Dividends (10.2) (10.3)
Debt Repayments - Net (24.3) (13.6)
Effect of Exchange Rate on Cash (0.5) (4.4)
Other 3.9 4.8
Cash Balance - End of Period 141.2$ 114.5$
Net Debt & EBITDA 9
1.2
1.3
1.5
1.2 1.2
1.2
1.2 1.1 1.1
1.0
0.8
0.5
0.0x
0.5x
1.0x
1.5x
Q1
F'14
Q2
F'14
Q3
F'14
Q4
F'14
Q1
F'15
Q2
F'15
Q3
F'15
Q4
F'15
Q1
F'16
Q2
F'16
Q3
F'16
Q4
F'16
NET DEBT / TTM EBITDA*
• July 31, 2016 Cash = $141.2M, Debt = $216.9M (net debt = $75.7M), and TTM EBITDA = $149.6M.
• Net Debt/EBITDA* = 0.5 to 1.
• Net debt declined by $63.5M from July 31, 2015 to July 31, 2016.
• Balance sheet continues to provide flexibility for future cash uses.
STRONG BALANCE SHEET:
* EBITDA is a non-GAAP measure. See appendix for the reconciliation of net income to EBITDA.
$210 $209
$221
$181 $174
$184
$168
$139 $140 $132
$101
$76
$0
$50
$100
$150
$200
$250
$300
Q1
F'14
Q2
F'14
Q3
F'14
Q4
F'14
Q1
F'15
Q2
F'15
Q3
F'15
Q4
F'15
Q1
F'16
Q2
F'16
Q3
F'16
Q4
F'16
NET DEBT (millions of USD)
10 F’17 Guidance
F’17 Diluted EPS $1.55 to $1.70
Guidance Assumptions:
• Low single digit organic sales declines to slight organic growth.
• Foreign currency exchange rates consistent with those as of July 31, 2016.
• Full-year depreciation and amortization expense of approximately $30M.
• Full-year income tax rate of 27% to 29%.
• Full-year capital expenditures of approximately $25M.
Q4 F’16 vs. Q4 F’15 PERFORMANCE (millions of USD)
11 Identification Solutions
• Revenues down (1.4%):
• Organic = -(0.2%)
• Fx = -(1.2)%
• Organic sales growth in Europe-based business.
• Organic sales decline in the Americas.
• Segment profit as a percent of sales increased as a
result of ongoing operational improvements and the
management of operating expenses.
• Non-routine charges of $7.4M recognized in Q4 of
F’15 significantly reduced segment profit.
• There were no non-routine charges in Q4 of F’16.
Q4 F’16 SUMMARY:
• Expect low-single digit organic sales declines to slight
organic growth in F’17.
• Expect segment profit to be in the low 20% of sales
range in F’17.
OUTLOOK:
Q4 F’16 Q4 F’15 Change
Sales $ 198.7 $ 201.6 - 1.4%
Segment Profit 46.3 29.0 + 59.5%
Segment Profit % 23.3% 14.4% + 8.9 pts
$212
$192
$201 $202
$196
$185
$197
$199
21%
19%
21%
14%
20% 20%
24%
23%
10%
13%
15%
18%
20%
23%
25%
$175
$185
$195
$205
$215
$225
Q1
F'15
Q2
F'15
Q3
F'15
Q4
F'15
Q1
F'16
Q2
F'16
Q3
F'16
Q4
F'16
SALES & SEGMENT PROFIT % (millions of USD)
Q4 F’16 vs. Q4 F’15 PERFORMANCE (millions of USD)
12 Workplace Safety
• Revenues decreased 4.3%:
• Organic = - (2.7)%
• Fx = -(1.6)%
• Continued increase in revenues in Europe offset by a
mid-single digit decline in the U.S. and a high-single
digit decline in Australia.
• Digital sales are improving as we are starting to see
the payback from investments this year.
• Segment profit of 19.2% is an improvement
compared to the prior year of 18.2% due to
efficiencies in catalog advertising and other selling
expenses.
Q4 F’16 SUMMARY:
• Expect low-single digit organic sales declines to slight
organic growth in F’17.
• Expect segment profit to continue to be in the upper
teens as a % of sales in F’17.
OUTLOOK:
Q4 F’16 Q4 F’15 Change
Sales $ 83.4 $ 87.1 - 4.3%
Segment Profit 16.0 15.9 + 0.8%
Segment Profit % 19.2% 18.2% + 1.0 pts
$102
$98
$91 $89
$87 $87
$84
$90
$83
18%
16%
14% 14%
18%
19%
16%
15%
19%
10%
13%
15%
18%
20%
23%
25%
$70
$80
$90
$100
$110
Q4
F'14
Q1
F'15
Q2
F'15
Q3
F'15
Q4
F'15
Q1
F'16
Q2
F'16
Q3
F'16
Q4
F'16
SALES & SEGMENT PROFIT % (millions of USD)
13 Future Financial Performance
GDP+
• Unrivaled customer service.
• Renewed R&D focus.
• Integrated solutions and technologies creating smarter products.
• E-business / Digital.
• Ability to achieve financial targets is contingent upon our ability to
increase organic sales to at least GDP.
Below GDP
Organic
Growth
Organic Sales
Growth
Organic Revenue Drivers:
• Minimize inefficiencies in our manufacturing facilities.
• Product rationalization and business simplification.
• Expected on-going pricing challenges.
• Significant strides were made in improving gross margins in F’16.
Gross Margin Drivers:
F’16
Expectation
Exiting F’18
Organic Sales
Growth
51% - 52%
49.9%
GPM GPM
• Decentralized operating philosophy, with standardized processes.
• Simplified and streamlined organization.
• Cost structure alignment of under-performing businesses.
• Savings to come slower than gross profit margin improvements.
SG&A Drivers:
33.5% - 34.5%
36.1%
of sales
SG&A SG&A
• Double-digit net earnings CAGR.
• Superior cash flow with disciplined and patient cash deployment
expected to enhance shareholder value through dividends and share
buybacks.
EPS Drivers:
$2.00/share
$1.58/share
EPS EPS
14 Investor Relations
Brady Contact:
Ann Thornton
Investor Relations
414-438-6887
Ann_Thornton@bradycorp.com
See our web site at
www.bradycorp.com
Appendix
15
COMPARABLE INCOME STATEMENTS (millions of USD)
16 Comparable Income Statements
2016 2015 Change
Sales 282.1$ 288.6$ (6.5)$
Gross Margin 141.1 129.1 12.0
% of Sales 50.0% 44.7%
Research and Development (9.3) (9.2) (0.1)
Selling, General and Admin. (98.4) (103.0) 4.6
% of Sales (34.9%) (35.7%) (0.8) pts
Impairment Charges - (46.9) 46.9
Restructuring Charges - (2.8) 2.8 - - -
Operating Income 33.4 (32.8) 66.2
Interest and Other (1.4) (2.9) 1.5
Income Taxes (6.9) (3.7) (3.2) - - -
Earnings from Continuing Operations 25.1$ (39.4)$ 64.5$ - - -
% of Sales 8.9% (13.7%) 22.5 pts
Earnings from Continuing Operations
per Class A Nonvoting Common Share 0.49$ (0.77)$ 1.26$ - - -
Net Earnings from Continuing Operations,
Excluding Certain Items (Non-GAAP
measure)* 25.1$ 14.4$ 10.7$ - - -
% of Sales 8.9% 5.0% 3.9 pts
Net Earnings from Continuing Operations
Per Class A Diluted Nonvoting Share,
Excluding Certain Items (Non-GAAP
measure)* 0.49$ 0.28$ 0.21$ - - -
Three Months Ended July 31, -
(‘000s of USD)
17 Debt Structure
July 31, 2016
Balance
July 31, 2015
Balance
Revolver Borrowings:
USD-denominated 1.31% Variable 112,000$ 102,000$
China Borrowings:
USD & CNY-denominated notes payable 4.00% Variable 4,928 10,411
Private Placements:
USD-denominated 2006 Series 5.30% Fixed - 26,143
USD-denominated 2007 Series 5.33% Fixed 16,334 32,743
EUR-denominated 2010 Series (7-yr.) 3.71% Fixed 33,510 32,960
EUR-denominated 2010 Series (10-yr.) 4.24% Fixed 50,138 49,442
TOTAL DEBT 216,910$ 253,699$
Interest Rate
Brady is presenting EBITDA because it is used by many of our investors and lenders, and is presented as a convenience to them. EBITDA represents net earnings
before interest expense, income taxes, depreciation, amortization and impairment charges. EBITDA is not a calculation based on generally accepted accounting
principles ("GAAP"). The amounts included in the EBITDA calculation, however, are derived from amounts included in the Consolidated Statements of Earnings
data. EBITDA should not be considered as an alternative to net earnings or operating income as an indicator of the Company's operating performance, or as an
alternative to net cash provided by operating activities as a measure of liquidity. The EBITDA measure presented may not always be comparable to similarly titled
measures reported by other companies due to differences in the components of the calculation.
EBITDA - Total Company (‘000s of USD)
18 EBITDA Reconciliation – Total Company
Q1 Q2 Q3 Q4 Total
18,703$ 15,290$ 20,981$ 25,136$ 80,110$
Interest expense 2,151 2,130 1,838 1,705 7,824
Income taxes 8,489 5,177 8,686 6,883 29,235
Depreciation and amortization 8,889 8,613 7,394 7,536 32,432
38,232$ 31,210$ 38,899$ 41,260$ 149,601$
Q1 Q2 Q3 Q4 Total
15,499$ 11,584$ 17,213$ (39,394)$ 4,902$
Interest expense 2,891 3,000 2,503 2,762 11,156
Income taxes 8,906 2,438 5,003 3,746 20,093
Depreciation and amortization 10,123 9,943 11,415 7,977 39,458
Impairment charges — — — 46,867 46,867
37,419$ 26,965$ 36,134$ 21,958$ 122,476$
Fiscal 2015
EBITDA from Continuing Operations:
Earnings (loss) from continuing operations
Fiscal 2016
EBITDA from Continuing Operations:
Earnings from continuing operations
EBITDA from Continuing Operations (non-GAAP
measure)
EBITDA from Continuing Operations (non-GAAP
measure)
Brady is presenting the Non-GAAP measures "Net Earnings from Continuing Operations Excluding Certain Items“ and “Net Earnings from Continuing Operations
Per Diluted Class A Nonvoting Common Share Excluding Certain Items.” These are not calculations based upon GAAP. The amounts included in these Non-
GAAP measures are derived from amounts included in the Consolidated Financial Statements and supporting footnote disclosures. We do not view these items to
be part of our sustainable results. We believe these measures provide an important perspective of underlying business trends and results and provide more
comparable measures from year to year. The tables below provide reconciliations of Net Earnings from Continuing Operations to Net Earnings from Continuing
Operations Excluding Certain Items, and 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.
Reconciliations of Non-GAAP Net Earnings from Continuing Operations (‘000s of USD)
19 Non-GAAP Reconciliations
2016 2015 2016 2015
$ 0.49 $ (0.77) $ 1.58 $ 0.10
Restructuring charges - 0.04 - 0.23
Impairment charges - 0.91 - 0.91
Other non-routine charges - 0.09 - 0.09
Postretirement benefit plan curtailment gain - - - (0.05)
Common Share Excluding Certain Items (non-GAAP measure) 0.49$ 0.28$ 1.58$ 1.27$
Nonvoting Common Share (GAAP measure)
Net Earnings fro Continuing Operations Per Diluted Class A Nonvoting
Three months ended July 31, Twelve months ended July 31,
Net (Loss) Earnings from Continuing Operations Per Diluted Class A
2016 2015 2016 2015
25,136$ (39,394)$ 80,110$ 4,902$
R structuring charges - 2, 58 - 11,743
I pairment charges - 46,867 - 46,867
Other no -routine charges - 4, 57 - 4,757
P stre rement benefit plan curtail nt gain - - - (2,792)
25,136$ 14,388$ 80,110$ 65,477$
Three months ended July 31, Twelve months ended July 31,
N t (L ) Earnings from Continuing Operations (GAAP measure)
Net Earnings fro Continuing Operations Excl ding Certain Items (non-
GAAP asure)