BRADY CORP - FORM 8-K - EX-99.1 - FIRST QUARTER FISCAL 2019 PRESS RELEASE - November 15, 2018

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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 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 (November 15, 2018)--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 income 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 accrued 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 borrowings on credit facilities
5,737

 
10,901

Repayments of borrowings 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 Company
$
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




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