Form 8-K BRADY CORP For: Nov 16
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 16, 2016
BRADY CORPORATION
(Exact name of registrant as specified in its charter)
Commission File Number 1-14959
Wisconsin | 39-0971239 | |
(State of Incorporation) | (IRS Employer Identification No.) | |
6555 West Good Hope Road
Milwaukee, Wisconsin 53223
(Address of Principal Executive Offices and Zip Code)
(414) 358-6600
(Registrant’s Telephone Number)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | RESULTS OF OPERATIONS AND FINANCIAL CONDITION |
On November 16, 2016, Brady Corporation (the “Company”) issued a press release announcing its fiscal 2017 first quarter financial results. A copy of the press release is being furnished to the Securities and Exchange Commission as Exhibit 99.1 attached hereto and is incorporated herein by reference.
Item 7.01 | REGULATION FD DISCLOSURE |
On November 16, 2016, the Company hosted a conference call related to its fiscal 2017 first quarter financial results. A copy of the slides referenced in the conference call, which is also posted on the Corporation’s website, is being furnished to the Securities and Exchange Commission as Exhibit 99.2 attached hereto and is incorporated herein by reference.
Item 9.01 | FINANCIAL STATEMENTS AND EXHIBITS |
(d) Exhibits
The following are filed as Exhibits to this Report.
Exhibit No. | Description of Exhibit |
99.1 | Press Release of Brady Corporation, dated November 16, 2016, relating to first quarter fiscal 2017 financial results. |
99.2 | Informational slides provided by Brady Corporation, dated November 16, 2016, relating to first quarter fiscal 2017 financial results. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
BRADY CORPORATION | ||
Date: November 16, 2016 | ||
/s/ AARON J. PEARCE | ||
Aaron J. Pearce | ||
Chief Financial Officer and Treasurer | ||
EXHIBIT INDEX
EXHIBIT NUMBER | DESCRIPTION |
99.1 | Press Release of Brady Corporation, dated November 16, 2016, relating to first quarter fiscal 2017 financial results. |
99.2 | Informational slides provided by Brady Corporation, dated November 16, 2016, relating to first quarter fiscal 2017 financial results. |
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 | |||||||||||
November 16, 2016
Brady Corporation
F’17 Q1 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: 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.
3 Q1 F’17 Financial Summary
• Sales down 1.0% to $280.2M in Q1 of F’17 vs. $283.1M in Q1 of F’16.
– Organic sales decreased 0.2%.
– Foreign currency translation reduced sales by 0.8%.
• Gross profit margin of 50.1% in Q1 of F’17 compared with 49.2% in Q1 of F’16.
• SG&A expense of $98.0M (35.0% of sales) in Q1 of F’17 compared with $100.7M
(35.6% of sales) in Q1 of F’16.
• Net earnings of $22.6M in Q1 of F’17 compared with $18.7M in Q1 of F’16.
• Net earnings per Class A Diluted Nonvoting Common Share of $0.44 in Q1 of
F’17, compared with $0.37 in Q1 of F’16.
• Net cash provided by operating activities of $34.0M in Q1 of F’17 compared
with $30.4M in Q1 of F’16.
• Segment financial results were recast to reflect our revised management
structure with more localized ownership and accountability.
4 Sales Overview
• (0.2%) organic sales decline:
• ID Solutions – Organic sales growth of 0.7%.
• Workplace Safety – Organic sales decline of
(2.5%).
• (0.8%) decrease due to currency translation.
Q1 F’17 SALES:
• Our healthcare and Asian IDS businesses experienced
low-single digit organic sales growth. Our European
WPS business continued to grow organically.
• Organic sales challenges persist in the U.S. and
Australia.
• Foreign currency translation headwinds persist.
Q1 F’17 SALES COMMENTARY:
$310
$283
$290 $289
$283
$269
$287
$282 $280
$200
$225
$250
$275
$300
$325
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%)
Q1 F'17
(0.2%)Organic Sales
Growth
SALES (millions of USD)
Gross Profit Margin 5
• GPM of 50.1% in Q1 of F’17 compared with 49.2% in Q1 of F’16.
• GPM improved due to ongoing efficiency gains throughout our global operations.
GROSS PROFIT MARGIN COMMENTARY:
$150
$138
$141
$129
$139
$133
$145
$141 $140
48% 49% 49%
45%
49% 49%
51%
50% 50%
25%
30%
35%
40%
45%
50%
$100
$125
$150
$175
Q1 F'15 Q2 F'15 Q3 F'15 Q4 F'15 Q1 F'16 Q2 F'16 Q3 F'16 Q4 F'16 Q1 F'17
GROSS PROFIT & GPM% (millions of USD)
SG&A Expense 6
• SG&A expense was down $2.7M to $98.0M in Q1 of F’17 compared to $100.7M in Q1 of F’16, continuing the general
downward trend.
• The ongoing declines in SG&A expense are a direct result of focused efforts on driving efficiencies across the
organization.
SG&A EXPENSE:
$109 $108
$103 $103 $101 $100
$106
$98 $98
35%
38%
35% 36% 36%
37% 37%
35% 35%
20%
25%
30%
35%
40%
$50
$75
$100
$125
$150
Q1 F'15 Q2 F'15 Q3 F'15 Q4 F'15 Q1 F'16 Q2 F'16 Q3 F'16 Q4 F'16 Q1 F'17
SG&A and SG&A% of SALES (millions of USD)
7 Net Earnings & EPS
* Net Earnings from Continuing Operations, Excluding Certain Items in F’15 and Net Earnings from Continuing
Operations Per Class A Diluted Share in F’15 are non-GAAP measures. See appendix.
• Q1 F’17 net earnings were $22.6M compared to $18.7M in Q1 of F’16.
• Increase in earnings trend driven by improved gross profit margins, efficiencies in operating expenses, and a reduced
income tax rate.
Q1 F’17 – NET EARNINGS & EPS:
$0.36
$0.29
$0.34
$0.28
$0.37
$0.30
$0.42
$0.49
$0.44
$0.00
$0.20
$0.40
$0.60
Q1 F'15 Q2 F'15 Q3 F'15 Q4 F'15 Q1 F'16 Q2 F'16 Q3 F'16 Q4 F'16 Q1 F'17
NET EARNINGS FROM CONTINUING OPERATIONS PER CLASS
A DILUTED SHARE, EXCLUDING CERTAIN ITEMS IN F’15*
$18
$15
$18
$14
$19
$15
$21
$25
$23
$0
$10
$20
$30
$40
Q1 F'15 Q2 F'15 Q3 F'15 Q4 F'15 Q1 F'16 Q2 F'16 Q3 F'16 Q4 F'16 Q1 F'17
NET EARNINGS FROM CONTINUING OPERATIONS,
EXCLUDING CERTAIN ITEMS IN F’15* (millions of USD)
8 Cash Generation & Uses
• Cash flow from operating activities was
$34.0M in Q1 of F’17 compared to
$30.4M in Q1 of F’16.
• Free cash flow* was $30.0M in Q1 of
F’17 compared to $28.0M in Q1 of F’16.
• Returned $10.4M to our shareholders in
the form of dividends in Q1 of F’17.
CASH FLOWS IN Q1 OF F’17:
* Free Cash Flow is calculated as Net Cash Provided by
Operating Activities less Capital Expenditures.
$26
$5
$29
$41
$30
$28
$40 $40
$34
$0
$10
$20
$30
$40
$50
Q1 F'15 Q2 F'15 Q3 F'15 Q4 F'15 Q1 F'16 Q2 F'16 Q3 F'16 Q4 F'16 Q1 F'17
Cash Flow from Operating Activities (millions of USD)
(millions of USD) 3 Mos. Ended
Oct. 31, 2016
3 Mos. Ended
Oct. 31, 2015
Cash Balance - Beginning of Period 141.2$ 114.5$
Cash Flow from perating Activities 34.0 30.4
Capital Expenditures (4.0) (2.3)
Repurchase of Stock - (16.2)
Dividends (10.4) (10.2)
Debt Repayments - Net 0.4 (2.7)
Effect of Exchange Rate on Cash (4.1) (2.6)
Other 9.2 (0.3)
Cash Balance - End of Period 166.3$ 110.6$
Net Debt & EBITDA 9
1.2
1.2
1.2 1.1 1.1
1.0
0.8
0.5
0.3
0.0x
0.5x
1.0x
1.5x
Q1 F'15 Q2 F'15 Q3 F'15 Q4 F'15 Q1 F'16 Q2 F'16 Q3 F'16 Q4 F'16 Q1 F'17
NET DEBT / TTM EBITDA*
• October 31, 2016 Cash = $166.3M, Debt = $216.0M, and TTM EBITDA = $151.3M.
• Net Debt/EBITDA* = 0.3 to 1.
• Net debt declined by $26.0M from $75.7M at July 31, 2016 to $49.7M at October 31, 2016.
• Balance sheet provides flexibility for future cash uses.
STRONG BALANCE SHEET:
* EBITDA is a non-GAAP measure. See appendix for the reconciliation of net earnings to EBITDA.
$174
$184
$168
$139 $140
$132
$101
$76
$50
$0
$50
$100
$150
$200
$250
Q1 F'15 Q2 F'15 Q3 F'15 Q4 F'15 Q1 F'16 Q2 F'16 Q3 F'16 Q4 F'16 Q1 F'17
NET DEBT (millions of USD)
10 Full Year F’17 Guidance Unchanged
F’17 Diluted EPS $1.55 to $1.70
Guidance Assumptions:
• Low single digit organic sales declines to slight organic sales growth.
• Full-year depreciation and amortization expense of approximately $30M.
• Full-year income tax rate ranging from 27% to 29%.
• Full-year capital expenditures of approximately $25M.
IDENTIFICATION SOLUTIONS – FINANCIAL PERFORMANCE SUMMARY (millions of USD)
11 Segment Financial Results – Recast
Q1 F’17 Q1 F’16 Q2 F’16 Q3 F’16 Q4 F’16
Full Year
F’16
Sales $ 201.3 $ 201.0 $ 189.8 $ 201.5 $ 203.2 $ 795.5
Organic Sales % 0.7% (2.2%) 0.9% (0.9%) (0.6%) (0.7%)
Segment Profit $ 33.1 $ 25.4 $ 23.1 $ 31.9 $ 31.9 $ 112.3
Segment Profit % of Sales 16.4% 12.7% 12.1% 15.8% 15.7% 14.1%
WORKPLACE SAFETY – FINANCIAL PERFORMANCE SUMMARY (millions of USD)
COMMENTARY
Q1 F’17 Q1 F’16 Q2 F’16 Q3 F’16 Q4 F’16
Full Year
F’16
Sales $ 78.9 $ 82.1 $ 78.9 $ 85.3 $ 78.8 $ 325.1
Organic Sales % (2.5%) (2.2%) (0.6%) 1.7% (1.8%) (0.7%)
Segment Profit $ 6.5 $ 9.4 $ 6.3 $ 6.0 $ 9.1 $ 30.8
Segment Profit % of Sales 8.2% 11.4% 8.0% 7.0% 11.5% 9.5%
Segment Financial Results were recast to reflect the following changes:
• Certain businesses were realigned between our WPS and IDS segments as we adjusted reporting responsibilities to
better match our strategy. This resulted in a relatively small decrease in our WPS revenues and an equal increase in
our IDS revenues.
• Our internal measure of segment profitability includes certain general and administrative expenses related to supporting
the business as part of our continued drive for increased local ownership and accountability.
Q1 F’17 vs. Q1 F’16 PERFORMANCE (millions of USD)
12 Identification Solutions
• All historical amounts have been recast to reflect the
revised segment definitions.
• Revenues up 0.1%:
• Organic = + 0.7%
• Fx = - (0.6)%
• Organic sales growth in healthcare and Asia-based
businesses.
• Organic sales declined in the U.S. and Europe.
Order patterns have not shown signs of
strengthening in the U.S.
• Segment profit as a percent of sales increased as a
result of ongoing operational improvements and the
management of operating expenses.
Q1 F’17 SUMMARY:
• Expect low-single digit organic sales declines to slight
organic growth in F’17.
• Expect segment profit to continue to be in the mid-
teens as a percent of sales in F’17.
OUTLOOK UNCHANGED:
Q1 F’17 Q1 F’16 Change
Sales $ 201.3 $ 201.0 + 0.1%
Segment Profit 33.1 25.4 + 30.0%
Segment Profit % 16.4% 12.7% + 3.7 pts
$201
$190
$201
$203
$201
13% 12%
16%
16%
16%
10%
12%
14%
16%
18%
20%
$180
$185
$190
$195
$200
$205
$210
Q1 F'16 Q2 F'16 Q3 F'16 Q4 F'16 Q1 F'17
SALES & SEGMENT PROFIT % (millions of USD)
Q1 F’17 vs. Q1 F’16 PERFORMANCE (millions of USD)
13 Workplace Safety
• All historical amounts recast to reflect the revised
segment definitions.
• Revenues decreased (3.8%):
• Organic = - (2.5)%
• Fx = - (1.3)%
• Continued increase in revenues in Europe offset by
high-single digit decline in the U.S. and Australia.
• Digital sales increased by more than 25% in Europe.
• Segment profit declined due to decreases in sales
and compressed gross profit margins partially caused
by business mix.
Q1 F’17 SUMMARY:
• Expect low-single digit organic sales declines to slight
organic growth in F’17.
• Expect segment profit to be in the upper single digits
as a % of sales in F’17.
OUTLOOK:
Q1 F’17 Q1 F’16 Change
Sales $ 78.9 $ 82.1 - 3.8%
Segment Profit 6.5 9.4 - 31.3%
Segment Profit % 8.2% 11.4% - 3.2 pts
$82
$79
$85
$79 $79
11%
8%
7%
12%
8%
5%
7%
9%
11%
13%
15%
$70
$75
$80
$85
$90
Q1 F'16 Q2 F'16 Q3 F'16 Q4 F'16 Q1 F'17
SALES & SEGMENT PROFIT % (millions of USD)
14 Investor Relations
Brady Contact:
Ann Thornton
Investor Relations
414-438-6887
[email protected]
See our web site at
www.bradycorp.com
Appendix
15
COMPARABLE INCOME STATEMENTS (millions of USD)
16 Comparable Income Statements
2016 2015 Change
Sales 280.2$ 283.1$ (2.9)$
Gross Margin 140.4 139.3 1.1
% of Sales 50.1% 49.2%
Research and Development (9.2) (8.6) (0.6)
Selling, General and Admin. (98.0) (100.6) 2.6
% of Sales (35.0%) 35.6% (0.6) pts
- - -
Operating Income 33.2 30.1 3.1
Interest and Other (2.2) (2.9) 0.7
Income Taxes (8.4) (8.5) 0.1 - - -
Net Earnings 22.6$ 18.7$ 3.9$ - - -
% of Sales 8.1% 6.6% 1.5 pts
Net Earnings per Class A Nonvoting
Common Share 0.44$ 0.37$ 0.07$ - - -
Three Months Ended October 31, -
(‘000s of USD)
17 Debt Structure
October 31, 2016
Balance
July 31, 2016
Balance
Revolver Borrowings:
USD-denominated 1.33% Variable 112,000$ 112,000$
China Borrowings:
USD & CNY-denominated notes payable 4.19% Variable 5,354 4,928
Private Placements:
USD-denominated 2006 Series 5.30% Fixed - -
USD-denominated 2007 Series 5.33% Fixed 16,350 16,334
EUR-denominated 2010 Series (7-yr.) 3.71% Fixed 32,949 33,510
EUR-denominated 2010 Series (10-yr.) 4.24% Fixed 49,309 50,138
TOTAL DEBT 215,962$ 216,910$
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 (‘000s of USD)
18 EBITDA Reconciliation
Q1 Q2 Q3 Q4 Total
22,553$ 22,553$
Interest expense 1,732 1,732
Income taxes 8,434 8,434
Depreciation and amortization 7,234 7,234
39,953$ -$ -$ -$ 39,953$
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$ EBITDA (non-GAAP measure)
Fiscal 2016
EBITDA:
N t earnings
EBITDA (non-GAAP measure)
Fiscal 2017
EBITDA:
Net earnings
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 F’15 Non-GAAP Net Earnings from Continuing Operations (‘000s of USD)
19 Non-GAAP Reconciliations
Year ended
October 31, 2014 January 31, 2015 April 30, 2015 July 31, 2015 July 31, 2015
15,499$ 11,584$ 17,213$ (39,394)$ 4,902$
R structuring charges 2,947 3,445 3,198 2,158 11,743
I pairment charges - - - 46,867 46,867
Other non-routine charges - - - 4,757 4,757
Postretirement benefit plan curtailment gain - - (2,792) - (2,792)
18,446$ 15,029$ 17,619$ 14,388$ 65,477$
N E gs (Loss) from Continuing Operations (GAAP measure)
Three months ended
Net Earnings fro Continuing Operations Excludi g Certain Items
( on-GAAP measure)
Year ended
October 31, 2014 January 31, 2015 April 30, 2015 July 31, 2015 July 31, 2015
$ 0.30 $ 0.23 $ 0.33 $ (0. 7) $ 0.10
Restructuring charges 0.0 0.07 0.06 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) - (0.05)
Nonvoting Common Share Excluding Certain Items (non-GAAP measure) 0.36$ 0.29$ 0.34$ 0.28$ 1.27$
Three months ended
Nonvoting Common Share (GAAP mea ure)
Net Earnings fro Continuing Operations Per Diluted Class
Net Earnings (Loss) from Continuing Operations Per Diluted Class A