BRADY CORP - FORM 8-K - EX-99.1 - FIRST QUARTER FISCAL 2017 PRESS RELEASE - November 16, 2016

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EXHIBIT 99.1



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

For immediate release

Brady Corporation Reports Fiscal 2017 First Quarter Results

•
Earnings per diluted Class A Nonvoting Common Share increased 18.9 percent to $0.44 in the first quarter of fiscal 2017 compared to $0.37 in the same quarter of the prior year.
•
Organic revenues declined 0.2 percent for the quarter ended October 31, 2016.
•
Net cash provided by operating activities was $34.0 million in the first quarter of fiscal 2017 and net debt was $49.7 million at October 31, 2016 providing flexibility for future investments.

MILWAUKEE (November 16, 2016)--Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2017 first quarter ended October 31, 2016.

Quarter Ended October 31, 2016 Financial Results:
Net earnings for the quarter ended October 31, 2016, increased 20.6 percent to $22.6 million compared to $18.7 million in the same quarter last year.
Earnings per diluted Class A Nonvoting Common Share increased 18.9 percent to $0.44 for the quarter ended October 31, 2016, compared to $0.37 in the same quarter last year.
Sales for the quarter ended October 31, 2016, decreased 1.0 percent to $280.2 million compared to $283.1 million in the same quarter last year. Total organic sales decreased 0.2 percent and foreign currency translation decreased sales by 0.8 percent. By segment, organic sales grew 0.7 percent in Identification Solutions and decreased 2.5 percent in Workplace Safety.

During the quarter ended October 31, 2016, the Company recast its historical segment financial information in response to two changes in its evaluation of segment financial performance.
First, the Company realigned certain businesses between its Workplace Safety segment and its Identification Solutions segment, resulting in increased revenues and segment profit in the Identification Solutions segment and equal and offsetting declines in revenues and segment profit in the Workplace Safety segment.
Second, the Company changed how it evaluates segment profit performance. Previously, administrative costs were excluded from the measure of segment profit. The Company’s evaluation of segment profit has been recast to include certain administrative costs within each of the segments, such as the cost of finance, information




technology, human resources, and certain other administrative costs. Interest expense, investment and other income (expense), income taxes and certain corporate administrative expenses continue to be excluded when evaluating segment performance.
Included in the accompanying financial information are the recast segment results for fiscal 2016.

Commentary:
“The Brady team is focused on producing high-quality products, providing excellent customer service, developing efficient and effective manufacturing processes, pushing for efficiencies in our SG&A structure, and building a culture where local teams are empowered to own and are held accountable for their financial results. This focus is working as evidenced by our fifth consecutive quarter of year-on-year earnings growth,” said Brady’s President and Chief Executive Officer, J. Michael Nauman. “Looking to the remainder of this fiscal year, we do not see a clear catalyst to accelerate global economic growth. In an environment such as this, focus and execution are critical. Our top priorities remain unchanged, which are to serve our customers extremely well, to grow our pipeline of innovative new products, and to deliver operational efficiencies in every facet of our business. We believe that our consistent focus on our long-term strategy has positioned Brady to compete effectively and deliver improved results to our shareholders.”
“Although organic sales declined by 0.2 percent this quarter, profitability improved compared to last year as our focus on driving operational efficiencies and actively reducing our general and administrative structure provided financial benefits again this quarter. We also remain focused on the business fundamentals that drive cash generation in the short- and long-term. Cash provided by operating activities was $34.0 million this quarter and we finished with net debt of $49.7 million as of October 31, 2016 compared to net debt of $75.7 million at the beginning of the quarter,” said Brady’s Chief Financial Officer, Aaron Pearce. “As a result of our strong cash generation, our balance sheet provides significant flexibility for future investment and returning funds to our shareholders.”

Fiscal 2017 Guidance:
The Company’s earnings per diluted Class A Nonvoting Common Share guidance for the year ending July 31, 2017 remains unchanged at $1.55 to $1.70. 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, which is reflective of economic challenges in certain industrial markets and geographies, including North America. 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 October 31, 2016, a full-year income tax rate of approximately 27 percent to 29 percent, capital expenditures approximating $25 million, and depreciation and amortization expense of $30 million.

A webcast regarding Brady’s fiscal 2017 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, 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; 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; changes in tax legislation and tax rates; 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 October 31,
 
2016
 
2015
Net sales
$
280,176

 
$
283,073

Cost of products sold
139,818

 
143,724

Gross margin
140,358

 
139,349

Operating expenses:
 
 
 
Research and development
9,146

 
8,569

Selling, general and administrative
98,004

 
100,678

Total operating expenses
107,150

 
109,247


 
 
 
Operating income
33,208

 
30,102


 
 
 
Other (expense) income:
 
 
 
Investment and other (expense) income
(489
)
 
(759
)
Interest expense
(1,732
)
 
(2,151
)

 
 
 
Earnings before income taxes
30,987

 
27,192


 
 
 
Income tax expense
8,434

 
8,489


 
 
 
Net earnings
$
22,553

 
$
18,703


 
 
 
Net Earnings per Class A Nonvoting Common Share:
 
 
 
Basic
$
0.45

 
$
0.37

Diluted
$
0.44

 
$
0.37

Dividends
$
0.21

 
$
0.20

 
 
 
 
Net Earnings per Class B Voting Common Share:
 
 
 
Basic
$
0.43

 
$
0.35

Diluted
$
0.42

 
$
0.35

Dividends
$
0.19

 
$
0.19

 
 
 
 
Weighted average common shares outstanding (in thousands):
 
 
 
Basic
50,634

 
51,029

Diluted
51,455

 
51,089





BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands)
 
October 31, 2016
 
July 31, 2016
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
166,301

 
$
141,228

Accounts receivable—net
145,831

 
147,333

Inventories:
 
 
 
Finished products
61,616

 
64,313

Work-in-process
16,971

 
16,678

Raw materials and supplies
18,815

 
18,436

Total inventories
97,402

 
99,427

Prepaid expenses and other current assets
20,392

 
19,436

Total current assets
429,926

 
407,424

Other assets:
 
 
 
Goodwill
424,345

 
429,871

Other intangible assets
57,590

 
59,806

Deferred income taxes
23,032

 
27,238

Other
15,550

 
17,181

Property, plant and equipment:
 
 
 
Cost:
 
 
 
Land
7,267

 
5,809

Buildings and improvements
95,288

 
95,355

Machinery and equipment
255,544

 
256,549

Construction in progress
2,093

 
2,842

 
360,192

 
360,555

Less accumulated depreciation
260,368

 
258,111

Property, plant and equipment—net
99,824

 
102,444

Total
$
1,050,267

 
$
1,043,964

LIABILITIES AND STOCKHOLDERS’ INVESTMENT
 
 
 
Current liabilities:
 
 
 
Notes payable
$
5,354

 
$
4,928

Accounts payable
58,011

 
62,245

Wages and amounts withheld from employees
49,510

 
45,998

Taxes, other than income taxes
7,373

 
7,403

Accrued income taxes
3,219

 
6,136

Other current liabilities
42,031

 
40,017

Total current liabilities
165,498

 
166,727

Long-term obligations, less current maturities
210,608

 
211,982

Other liabilities
60,107

 
61,657

Total liabilities
436,213

 
440,366

Stockholders’ investment:
 
 
 
Common stock:
 
 
 
Class A nonvoting common stock—Issued 51,261,487 and 51,261,487 shares, respectively and outstanding 47,334,496 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
317,044

 
317,001

Earnings retained in the business
465,554

 
453,371

Treasury stock—3,926,991 and 4,340,513 shares, respectively of Class A nonvoting common stock, at cost
(97,840
)
 
(108,714
)
Accumulated other comprehensive loss
(66,914
)
 
(54,745
)
Other
(4,338
)
 
(3,863
)
Total stockholders’ investment
614,054

 
603,598

Total
$
1,050,267

 
$
1,043,964






BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)
 
Three months ended October 31,
 
2016
 
2015
Operating activities:
 
 
 
Net earnings
$
22,553

 
$
18,703

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
7,234

 
8,889

Non-cash portion of stock-based compensation expense
3,155

 
2,596

Deferred income taxes
2,027

 
726

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(680
)
 
(3,342
)
Inventories
1,197

 
1,368

Prepaid expenses and other assets
(1,170
)
 
(3,081
)
Accounts payable and accrued liabilities
2,546

 
2,402

Income taxes
(2,869
)
 
2,109

Net cash provided by operating activities
33,993

 
30,370

 
 
 
 
Investing activities:
 
 
 
Purchases of property, plant and equipment
(3,959
)
 
(2,334
)
Other
1,511

 
1,539

Net cash used in investing activities
(2,448
)
 
(795
)
 
 
 
 
Financing activities:
 
 
 
Payment of dividends
(10,370
)
 
(10,183
)
Proceeds from exercise of stock options
8,813

 
—

Purchase of treasury stock
—

 
(16,160
)
Net proceeds (repayments) from borrowings on credit facilities
426

 
(2,738
)
Debt issuance costs
—

 
(803
)
Income tax on equity-based compensation, and other
(1,232
)
 
(1,007
)
Net cash used in financing activities
(2,363
)
 
(30,891
)
 
 
 
 
Effect of exchange rate changes on cash
(4,109
)
 
(2,566
)
 
 
 
 
Net increase (decrease) in cash and cash equivalents
25,073

 
(3,882
)
Cash and cash equivalents, beginning of period
141,228

 
114,492

 
 
 
 
Cash and cash equivalents, end of period
$
166,301

 
$
110,610






BRADY CORPORATION AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited; Dollars in thousands)

 
Three months ended
 
Three months ended
 
Year ended
October 31, 2016
 
October 31, 2015
 
January 31, 2016
 
April 30, 2016
 
July 31, 2016
 
July 31, 2016
SALES TO EXTERNAL CUSTOMERS
ID Solutions
$
201,264

 
$
201,020

 
$
189,780

 
$
201,482

 
$
203,229

 
$
795,511

Workplace Safety
78,912

 
82,053

 
78,850

 
85,334

 
78,877

 
325,114

Total Company
$
280,176

 
$
283,073

 
$
268,630

 
$
286,816

 
$
282,106

 
$
1,120,625

 
SALES INFORMATION
ID Solutions
Organic
0.7
 %
 
(2.2
)%
 
0.9
 %
 
(0.9
)%
 
(0.6
)%
 
(0.7
)%
Currency
(0.6
)%
 
(5.4
)%
 
(4.6
)%
 
(1.1
)%
 
(1.2
)%
 
(3.1
)%
Total
0.1
 %
 
(7.6
)%
 
(3.7
)%
 
(2.0
)%
 
(1.8
)%
 
(3.8
)%
 
Workplace Safety
Organic
(2.5
)%
 
(2.2
)%
 
(0.6
)%
 
1.7
 %
 
(1.8
)%
 
(0.7
)%
Currency
(1.3
)%
 
(9.8
)%
 
(7.2
)%
 
(0.9
)%
 
(1.8
)%
 
(5.0
)%
Total
(3.8
)%
 
(12.0
)%
 
(7.8
)%
 
0.8
 %
 
(3.6
)%
 
(5.7
)%
 
Total Company
Organic
(0.2
)%
 
(2.2
)%
 
0.4
 %
 
(0.1
)%
 
(0.9
)%
 
(0.7
)%
Currency
(0.8
)%
 
(6.6
)%
 
(5.4
)%
 
(1.1
)%
 
(1.4
)%
 
(3.7
)%
Total
(1.0
)%
 
(8.8
)%
 
(5.0
)%
 
(1.2
)%
 
(2.3
)%
 
(4.4
)%
 
SEGMENT PROFIT
ID Solutions
$
33,068

 
$
25,431

 
$
23,056

 
$
31,898

 
$
31,891

 
$
112,276

Workplace Safety
6,450

 
9,382

 
6,296

 
6,012

 
9,102

 
30,792

Total
$
39,518

 
$
34,813

 
$
29,352

 
$
37,910

 
$
40,993

 
$
143,068

 
SEGMENT PROFIT AS A PERCENT OF SALES
ID Solutions
16.4
 %
 
12.7
 %
 
12.1
 %
 
15.8
 %
 
15.7
 %
 
14.1
 %
Workplace Safety
8.2
 %
 
11.4
 %
 
8.0
 %
 
7.0
 %
 
11.5
 %
 
9.5
 %
Total
14.1
 %
 
12.3
 %
 
10.9
 %
 
13.2
 %
 
14.5
 %
 
12.8
 %

 
Three months ended
 
Three months ended
 
Year ended
October 31, 2016
 
October 31, 2015
 
January 31, 2016
 
April 30, 2016
 
July 31, 2016
 
July 31, 2016
Total segment profit
$
39,518

 
$
34,813

 
$
29,352

 
$
37,910

 
$
40,993

 
$
143,068

Unallocated amounts:
 
 
 
 
 
 
 
 
 
 
 
Administrative costs
(6,310
)
 
(4,711
)
 
(5,763
)
 
(7,126
)
 
(7,590
)
 
(25,190
)
Investment and other (expense) income
(489
)
 
(759
)
 
(992
)
 
721

 
321

 
(709
)
Interest expense
(1,732
)
 
(2,151
)
 
(2,130
)
 
(1,838
)
 
(1,705
)
 
(7,824
)
Earnings before income taxes
$
30,987

 
$
27,192

 
$
20,467

 
$
29,667

 
$
32,019

 
$
109,345




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